As you could probably tell from the skeleton crew on CNBC this morning, many big market players will be cutting the week short to get ready for Christmas.
The final two weeks of the year are normally positive for the markets, but 2006 could bring some dramatic moves to the downside.
Our country's financial resourses are continually being drained to fight terrorism. While we do need to be proactive to protect our citizens, the fight is costing us a fortune.
We are not fighting a stupid enemy. They quickly figured out that they could inflict maximum pain by attacking the nations pocketbook. I think they are right.
IS ANOTHER RALLYING COMING?
The fine people at Erlanger Squeeze Play thinks so. Here are the latest comments from Phillip Erlanger (www.erlangersqueezeplay.com):
We think the pullback phase is long in the tooth:
If the market holds to its seasonal cycle, this week we should see a return to a full blown intermediate advance phase. The NASDAQ passed a little "relative" gas on Friday as the 12 issues leaving the NASDAQ 100 index saw distribution. This week the NASDAQ 100 sees the return to a seasonal positive period beginning 12/20/05. This seasonal strength lasts until 2/06/06. We also note that the EBB indicator (a measure of implied volatility momentum versus price momentum) is turning up we expect the EBB to rally, but not to confirm higher highs in the averages. This will likely put in a top of larger degree sometime in February 2006.
Energy flirted with a rally over the past 10 days, but has returned to decline status:
This month crude oil rallied a little higher than was comfortable, which speaks well for the stock market which held well. The MACD for the crude contract is now turning down, and the trend direction is now back to "downtrend" status. We contemplate a move into the lower $50s over the next month and a half.
We are now into the final weeks of the holiday season, and while it may seem the market should be somewhat inactive during this time, it quite often makes a significant move. This is especially true for years ending in 5. On Wednesday we get a fresh read of NYSE and Amex short interest data. Stay tuned.
Regards,
Philip B. Erlanger, CMT
2006 CONCERNS:
I don't want to sound like a broken record, so you can browse through the website to get some indepth comments about what we see coming in 2006. Here are a few other points to take under consideration:
According to the stock traders almanac, "9 of the last 14 bear markets occurred in midtern election years, including 3 of the last 4". Of course, 2006 is a midterm election year, and the odds heavily favor a return to a bear market.
Secondly, The Hirsch organization points out that "a change in Fed Chairs may be another catalyst that will instigate a decline. In the 13 fed chairs that took office, they all took office around the same inflection points in the market, economy or monetary policy. when 3 of the last 4 Chairman took office a bear market bottom occurred within months".
TECHNICAL LEVELS:
S&P support 1240-1250/resistance 1320-1350
DJIA support 10,700-10,750/resistance 11,000
NASDAQ support 2200/ resistance 2500-2700
Merry Christmas to all !
