Around the world while we were sleeping:

Asia put in another strong performance.  Good manufacturing numbers out of Japan helped to boost the Nikkei and the Yen.

Europe is mostly green across the board with a subdued rally this am, but green is green and our futures sit currently at +2.75 on the ESH10s.  That makes 4 days in a row of a potential gap opening.  The dollar is suffering weakness which also helps the bulls case.

US Economic News:

It is Christmas eve but our government is hard at work., passing healthcare reform and delivered as a Christmas present to all Americans and their guest.  That is not the only part of government at work we have numbers coming out this morning too, hopefully the bean counters get to go home after they push the buttons for the 8:30 releases.

The durable goods number could erase the gap this morning on the open.. The reaction to a terrible New Home sales yesterday and a less then stellar sentiment number was an immediate sell-off followed by buying strength through most of the day to close on highs in the NQ and RUT.  I would expect that weak numbers today will be treated the same.  This market wants to rally.

For the jobless claims, it would be great if Santa could deliver that decade down from last week and show continued downward progress.  What we don’t want to do is jump back above that 500K number. Yuck.  So plenty of news prior to the market to either set the gap opening or erode it down to flat.

Outlook..

I ran my numbers last night and yesterday was very bullish.  The underlying breadth sentiment was in all three indices.  The topping signal for us is the Zweigs which have gone overbought  on all indices and will look for a reprieve, but they can stay overbought for a few days and this market with low volume and high breadth sentiment could explode.  It is like a Mento dangling over a bottle of coke. Watch the new highs and the A/D lines today.. if they start to weaken and accelerate to the downside than the show is over and head for the exits.

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There are still a few seats left in the trading room.  For more information visit http://TTTHedge.com

Japan was up almost 2% while China held  to about .7% after being up over 1% but sliding a little into the close.

Across the watery divide to Europe which is continuing it Christmas rally mood.

London is a leader this morning with a 1% rally and the rest of Europe is following along. All markets are in the green as of 7:40am this morning.

Morning Econ News:

Our ES futures are up 6 pts from their 4:15pm close which is quite strong, but there is some econ news that will either throw a little cold rain or add sunshine to today’s parade.

GDP will most likely stay unchanged and this finishes the 3Q GDP releases and now we start a Q1 2010 cycle.

Existing homes if they hit their 6.25M expected number (the left Colum is expectations the right column is last report’s value) that will show continued improvement in the home sector.  This news comes in a half hour after the market opens and could be a buzz killer if the market rallies in the first 30 minutes.  Eyes will be on the Richmond Mfg index at 10 am also as these manufacturing indices have hit a little rough patch in the last 30 days.

Today’s Chart

Correlation.  That is when one chart looks a lot like the other chart.  If one chart is going up the other is also going up.  That had been the situation for the US stock market and the EURUSD forex pair.  From the chart below we are seeing that the strong correlation that existing just last week appears to be breaking as both the US dollar and the markets are in rally mode.

The good news is that the market can rally with out a falling dollar.  The bad news is that the market now has to fundamentally perform and can not count on a dollar carry trade to boost it’s prices. Economic numbers are more important the ever as we shift gears here into an economic recovery mode.

-Happy Holidays

Marlin – aka RedlionTrader

If we confirm during the day that the NYSE is going to turn to bullish long and the RUT and the NADQ maintain their long sentiment then I will be scalping on the long side.  If these don’t set up I will be setting myself up to short in a 10 day window from here.

See you all tomorrow in the room.

Back from Bangor-Maine where I spend some great quality family time with my extended set of relatives and my mom.  It was fantastic to get together.  They are a hardy lot that live in the north country. 

Now back to work.

The week closed mixed with the DOW down -1.36% and the Russell closing up 1.67%, the small caps showing relative strength is a good sign.

A look at the Charts:

The 10 Day High-Low chart has again swung to neutral from the previous days bearish state.  The markets are getting very difficult to predict.   Instead on nice swings of momentum change the charts are looking like they are in fibulation and need a break-out one way or another to get some type of rhythm back in the price action.   Somebody bring out the paddles or call the market dead..

The 40 DMA % Index chart still is making a positive climb showing underlying strength in a broad base still exits. It scores a +6 today from yesterday’s neutral scoring. 

The 52 Week new highs recovered from the Thursday selloff with the Nasdaq composite and the Russell 2000 able to turn a one day bearish signal back to bullish.  The NYSE did not have enough strength to do so. Monday’s open will have to be quite strong to keep the momentum going and to get the NYSE join the stronger indices.

Watch for an opening 30 minute new high of around 200.  Anything less will indicate a high probability that the NYSE 52 Week new high will stay bearish into the close.  Above 200 tells us that the bulls have regained the momentum.  Any sell offs in that case should be bought.

Overall the three charts score a +10 which is on the bullish side but they are swinging everyday here between bullish and bearish.  I would like to see it put together a streak in here.

The week will bring lighter volume as the markets wind down for a Christmas weekend.  Short term scalp and swing while we wait for the markets to decide on a definitive direction from what is turning into a two month consolidation.

News Next Week:

Looking ahead at economic news for the week.  At midnight Sunday the Bank of Japan issues its monthly report and news positive or negative could impact the dollar overnight.  The bulls need China, Japan and Eurozone to set the markets on the right course for Monday’s open. 

US news over the week starts on Tuesday with the revised GDP numbers for the 4th quarter.  Expectations are that we will stick with the 2.8% number that was recently revised down from 3.2%.  Also on Tuesday at 10am EST  the Existing Home Sales Numbers are released.  These should have a direct intraday effect on the market.  At the same time the Richmond Manufacturing Index will be released and there is a high expectation of a +4 on the reading but recently these numbers have been disappointing.  That is something to watch. 

Moving to Wednesday at 8:30 am we get core PCE price Index, personal spending and income.  At 9:55 am the Michigan Consumer Sentiment Index and at 10am New Home sales will be released.  The Crude inventories are out at 10:30 am on the same day.

Christmas Eve the news continues at 8:30 am with Durable Goods and initial jobless claims at 8:30 and the Natural Gas Storage numbers at 10:30 am.

Currently Europe is awash in a sea of red.  The major indices the FTSE in the UK is hovering close to the -1% area, the DAX about 1/2 of that at .56% negative which pretty much defines the range.

Econ numbers overnight were not terrible except for the retail numbers out of Great Britain at 4:00 am this morning showing a -.30% increase in retail where they had expected a growth of .5%, that is almost at 1% swing to the negative side.  Clearly now there is some softening in the “first to emerge” nations of Europe.  That puts a string of numbers together from Great Britain, Germany and France that have been consistently falling outside the range of expectations and recovery.  The question is are they leading us now or is it the other way around. 

Overnight Dollar Index Gains over 1%

The DXY gained over 1% from a 4pm close yesterday until the early morning hours.  The reason for the huge daily gain lies in the continuing unwinding of  the dollar carry trade.   It appears to be related to the Fed meeting although I have not read exactly what has triggered the sudden momentum increase but the direction is definitely toward a stronger dollar. I talked in the weekend update video a little about the dollar.

We have our own numbers to work through at 8:30am which is the Jobless Claims. Fed-X released some encouraging numbers this morning lending more evidence that the US economy is bouncing from its bottom. It has plenty of stimulus now so let’s see how hot it can ignite.

The futures trade only one way now, counter to the DXY.  The DXY is up 1% the futures are down 1%.  At some point, at least if the bulls want to take it to the next level, those shackles need to be broken.  The futures down 1% today premarket open will  be tough on our indicators and will zap buyers strength to take us to new highs.

We will wait for the 8:30 news to fix the market open and then wait until 10am to see how the market reacts to the gap.

See you in the Markets!

-RLT

There appears to be no Asia news tonight so we will have to see if China can get out of its funk and Japan can follow through yesterday’s strength, perhaps that can feed into Europe.  Great Britain is reporting retail sales numbers in the morning.   Strength in the number could slow the dollar’s gains and keep the US futures up, but we have our own set of numbers to contend with including the pre-market initial jobless claims scheduled at 8:30.  A 460K to 475K number should be just right to keep us even keeled into the opening. 

A flat open would be good for the bulls.  What the bulls don’t want is a gap down open since this will zap so much of the built-in momentum already in this market.

If you are in the trading room we will keep you updated.  If you are following us on twitter (RedlionTrader, Tomandprisha) you will get some delayed updates.

If you want to visit us in the trading room doing our live trades use this link: http://bit.ly/5h5sk1
we do market update at 9:15 pre-open for our daily game-plan and regular updates all day long.

We are attempting to fill our remaining seats and I think there may be only about 5 left now before the end of the year.  You can read more about our special at the http://ttthedge.com website.

There appears to be no Asia news tonight so we will have to see if China can get out of its funk and Japan can follow through yesterday’s strength, perhaps that can feed into Europe.  Great Britain is reporting retail sales numbers in the morning.   Strength in the number could slow the dollar’s gains and keep the US futures up, but we have our own set of numbers to contend with including the pre-market initial jobless claims scheduled at 8:30.  A 460K to 475K number should be just right to keep us even keeled into the opening. 

A flat open would be good for the bulls.  What the bulls don’t want is a gap down open since this will zap so much of the built-in momentum already in this market.

If you are in the trading room we will keep you updated.  If you are following us on twitter (RedlionTrader, Tomandprisha) you will get some delayed updates.

If you want to visit us in the trading room doing our live trades use this link: http://bit.ly/5h5sk1
we do market update at 9:15 pre-open for our daily game-plan and regular updates all day long.

We are attempting to fill our remaining seats and I think there may be only about 5 left now before the end of the year.  You can read more about our special at the http://ttthedge.com website.

-RLT

This indicator lately has not be performing well as we have rallied with market breadth weakness.  There is an underlying sell going on that is not reflected in indices.  (Maybe a flight to quality).  Currently they are setting up to issue a buy signal, perhaps into the closing today if we rally, but if Friday has any strength it should be in the Buy camp.

• It sure feels toppy in here
• I think we are oversold
• Seems like the bears are in control
• What bothers me is that …

You get the message.  In fact this post itself is a feely post.  It start off with “I hate…”

To become better traders we need to put aside our feelings and concentrate on facts.  Is the market oversold?  Is it toppy?  How do you measure toppiness?  What is toppiness?

When you get posts or newsletters or read blogs that have these “code” words in it, you need to read it as the author does not know nor does he/she have an answer.   Unless you have quantified the “gut” success of the author ignore the feelings.  Strike them from the record.   Too often we go looking for confirmation on our “feelings” and we find market empathy.  We must approach the markets with feeling neutrality and trade the quantifiable information we can extract.

I too often use these soft words too in my postings but I pledge to become better.  You will notice as you start to read more and more newsletters who are the emotional traders and who trade on information.  Learn to decode and you can start to find the best information out there.

RedlionTrader