Snapshot Notes - December 3, 2007

As of:

SPX 1490

Coming into today, we had a couple of new-month studies suggesting that we may see a first-of-the-month pop higher, but after that it would likely be rougher sailing ahead, at least in the short-term.

We didn't see much evidence of strength in the broader equity indices, as they gapped lower to open the session and weren't able to make much headway throughout the day.

That still leaves us in a rather murky short-term condition. I went over a number of looks at our current position, and couldn't find much that strongly suggested a solid edge either way, but from the studies we went over last week, I'm still favoring the idea that we'll more than likely see more of a rest than what we saw today. It's just not often that we see the kind of rebound from a low that we did last week, and not see a slide back down to re-test the low. I don't expect a full re-test, but a move towards 1440 - 1450 would go a long way towards working off some of the short-term extremes we hit last week.

Any such pullback should just serve to offer a better opportunity for longer-term positions. I haven't been able to find anything that would negate the positives we've discussed over the past couple of weeks (severe oversold condition, followed by an upside thrust, during the most consistently positive month of the year). All of those factors considered separately led to very impressive results over the next one to three months, so taken in combination the risk/reward appears quite strong in that time frame.

As of:

SPX 1490

HELP ARCHIVE

Late last week and again this morning, we went over the idea that even if we did happen to get some new-month strength to begin this week, it probably wouldn't last long.

There were a few different things we looked at last week pointing to short-term weakness, especially if we happened to managed a rise today. Even without that, though, the idea that we're going to experience a pause seems more likely than not.

I don't have much new to go over this afternoon. I've done a lot of searching and testing today regarding price patterns, seasonality, sentiment - all the usual culprits - and I haven't been able to find too much that strongly supports a short-term move in either direction. Though I don't have a lot of backup besides what we went over last week, I continue to favor the short-term pullback idea for now.

That doesn't impinge whatsoever on the slew of intermediate-term positives we spent so much time going over, so I'm looking at any potential short-term weakness as an opportunity to establish or add to longer-term (one to three month) long positions.

As of:

SPX 1490

HELP ARCHIVE

Good Monday morning...We begin the day with moderate weakness in the pre-market futures. They were showing a mild gap up until the last hour, during which the Nasdaq 100 contracts dropped nearly 20 points.

We start the new month with many traders desperately trying to forget a very tough November, and looking forward to the seasonal refuge often provided by December. Some may also be hoping for the "December rebound" after tough Novembers - all five times that the S&P 500 has lost more than 4% during November, December showed a positive return averaging +5.6% (1973, 1974, 1987, 1991 and 2000). After three of those years, the positive Decembers led to some abnormally horrid performance during the following year, however.

I went over some shorter-term patterns last week, dealing with the performance of the S&P during the last day of a month, that suggested we could see some upside today, but not so much afterward. That coincides with some other studies we looked at that told us to expect short-term rallies to have trouble sustaining themselves, and that seems particularly apropos with the S&P having difficulty at that 1480 - 1500 zone we were looking at last week.

If we do get some strength today, I'm not expecting it to last long, and it seems as though there's a better-than-even chance that we'll get a re-test of last week's low sometime this week or next. I'd consider a move down towards 1440 - 1450 to be close enough to consider it a test, so we'll see if that unfolds this week. Either way, I continue to find very little on an intermediate-term time frame (looking out one to three months) that contradicts all the positive notes we've gone over during the past couple of weeks, and the risk/reward still seems heavily skewed to the long side on that time frame.

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