STTG Market Recap Dec 11, 2012

Interesting session Tuesday as both the NASDAQ and S&P 500 made runs at early November highs but were rejected intraday, thus failing to create a new higher high - reversing the intermediate term pattern of lower new highs.  However, the smaller cap oriented Russell 2000 did clear the highs from early November.   Reasons cited for today's move was a much better than expected business confidence report out of Germany, more quantitative easing from the Fed to be delivered tomorrow as well as progress on the fiscal cliff.  Of course both Boehner and Reid made comments today and the market shrugged off the former but sold off some on the latter.  The S&P 500 gained 0.65% and the NASDAQ 1.18%.

First the chart of the Russell 2000 which is more focused on small capitalization stocks - this has been the strongest index in December and has become the first to clear early November highs.

The S&P 500 went exactly to the peak it reached November 2 - to the second decimal point in fact, before falling.  It is now in the top third of that orange box highlighted below so ascending over it, and holding that would be a positive.

The NASDAQ did not quite reach the November 2 peak but again is a slave to Apple to a degree.

 

Cloud company Salesforce.com (CRM) had a Cup & Handle breakout today (green lines). Chart and pattern analysis from MarketSmith.

 

Dan Zanger was on this setup prior to today's CRM breakout. Here is Zanger's chart from his newsletter yesterday evening. Read Blain's full review of Dan Zanger for more information on his newsletter.

 

If you are interested in what the market now expects the Fed to do tomorrow, Bloomberg has a good piece.  Keep in mind after the Fed announced unlimited "QE" in mid September the market peaked the next day and began a two month slide.  So the sugar high from QE and QE after QE has begun to wear off.  But like a good drug addict the Fed is simply increasing the dosages to keep the patient "hooked".  Essentially the Fed is now buying the vast majority of debt the country produces every year at the run rate expected to be announced tomorrow ($85 billion a month).

The Federal Reserve will amplify record accommodation tomorrow by announcing $45 billion in monthly Treasury buying that will push its balance sheet almost to $4 trillion, according to a Bloomberg survey of economists.  The central bank this month is scheduled to end Operation Twist, in which it swaps $45 billion of short-term Treasuries each month for longer-term government debt. That program kept the total size of the balance sheet unchanged, while new Treasury purchases would expand it.

From last night's SentimenTrader,

According to Hulbert Financial Digest, newsletter writers focused on the Nasdaq are recommending a 50% net long position. That's up from a -38% net short position just three weeks ago, one of the largest three-week changes in sentiment in a decade. That's mildly troubling. It would become more so if their recommended position climbed to 65% net long or above.