US Stock Market Outlook For Wednesday

It’s going to be really quiet today (Wednesday) . We have a half day today, which means that we close at 1:00PM. We have several economic reports coming out in the morning (not that they even matter these days): Durable Goods (8:30AM), Personal Income/Outlays (8:30AM), Jobless Claims (8:30AM), and don’t forget that we have the EIA Petro report (10:35AM) and the EIA Nat Gas report (12:00PM) coming out on the same day. Could be volatile for you oil/gas folks.

The markets have been very quiet, just drifting down in an orderly fashion. We did break the November low trend line but before I go crazy on the short positions, I’ll need comfort knowing that we’re going to breakdown below 850 on the S&P 500 (^GSPC) (see SPX 35-day). We could be trading in a range, however a breakdown will kill the chance for neutral bound trading. This confirmation should come either today or Friday.

Glancing at individual sectors, I’d have to say that materials, industrials, financials, technology, and consumer discretionary look weak as hell. Utilities, energy, consumer staples appears to be neutral (going on to becoming weak). Healthcare is still doing the best (not breaking out or anything, but consolidating). In addition, sub sectors such as retailers and home builders look like they’re about to fall off (ex. BZH, HOV, JNY & LIZ - already off).

Here’s the problem with the rally: it’s taking too long and the set up is breaking down. Obviously, the market is running out of steam and it doesn’t matter if it’s a holiday week. Many traders have withdrawn from the markets, including the big money, and there’s simply a lack of interest in the market as evidenced by multi-week trading on lower and lower volume.

Likewise, the VIX (^VIX) reversed, even if it was 1%. Yesterday’s action created a 4th tail and suggests more room to the upside if the VIX penetrates above the 100-day MA. Watch the VIX carefully, even though it’s kinda busted. Watch the 45-46 level.

Let’s see what happens. If I were you, I’d spend all of tomorrow going shopping for those 50-80% discounts. All-niters are not just for desperate students anymore. It’s typically not worth trading on Christmas Eve.

SPX 1-day

SPX 3-day

SPX 5-day

SPX 10-day

SPX 35-day

SPX 5-month

NASDAQ (^IXIC) 5-month

DJIA (^DJI) 5-month

VIX 5-month

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