Denial Ain't Just A River In Egypt

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Mark Twain

Hard to say whether the market hit bottom from its two day indigestion or whether Tuesday's session will turn out as more of a respite or “a market in denial” which now might really become that sick after counting on always having robust health for the last several years. Trust me, I can relate!

Doubtful we are in for any major disasters now given the small caps or Russell 2000s spectacular show of how it can trade nearly the entire range of the last 5 weeks in just one sleepy day in December, with only 16 more shopping days left until Christmas. Ho ho ho!

Generally speaking, when an instrument in a bull phase gaps lower then proceeds to turn around, rallying above the previous day’s lows, that is a low risk signal to buy. That transpired in a lot of equities, but notably, happened really early on in the session in IWM (and against the 200 DMA support too) as well as in NASDAQ, SPY but not in DIA until the last 5 minutes of the day, which ultimately could not sustain.

Therefore, for Wednesday, look for follow through in the small caps particularly. They still have to clear 118.75 to break the highs of the recent range. Otherwise, we can safely say that SPY and QQQs did not confirm reversal candles from their new highs while DIA remains suspect not closing above 177.97 the previous day low.

One other note-the metals and miners I wrote should be a focus for Tuesday’s session-instant gratification, thank you very much!

S&P 500 (SPY) Broke the 204 support marginally then turned around to close above Monday’s low. That does negate the reversal candle but unless it clears back over 207.20, could still be in correction mode.

Russell 2000 (IWM) This now has such a huge range-an inside day is the best bet. But, I wouldn’t discount the possibility of a run to 118.75 so fast either

Dow (DIA) Although it held support from mid-November, it also failed to clear Monday’s lows. 178.40 is a good place to renew confidence here

Nasdaq (QQQ) Held on and now we can see if this clears 105.20 or needs some digestion from its digestion and winds up with an inside day

XLF (Financials) Over 25 gets this back in shape

KRE (Regional Banks) Over 41.20 this takes out work that goes back from July.

SMH (Semiconductors) Did not confirm the reversal candle for same reason that SPY did not

IYT (Transportation) Gapped lower and did not fill that gap-still weak til that happens

IBB (Biotechnology) Hats off to this group!

XRT (Retail) If this finished the correction today, which is possible, then we need to see it clear 93.00

IYR (Real Estate) A prime example of what I describe in the 3rd paragraph of the text.

ITB (US Home Construction) Held 25.00 so far

GLD (Gold Trust) Confirmed phase change back to recovery-and closed up over 2%

GDX (Gold Miners) Unconfirmed phase change back to recovery. Over 20.00 looks good

USO (US Oil Fund) Only pattern that would excite me now is an island bottom if happens

OIH (Oil Services) Possible reversal from the lows if confirms

XLE (Energy) Same as OIH

XOP (Oil and Gas Exploration) Ditto to OIH

TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs got the close above 122.85 on a gap higher124.13 next hurdle and a break of 121.44 would put some pressure on this