Snapshot Notes - December 4, 2007

As of:

SPX 1490

It's been another session with much ado about nothing, as the major indices have just chopped in a fairly tight range since the opening gap.

This can be very constructive behavior, since it helps to work off the short-term overbought readings that we witnessed last week, without doing a whole lot of price-based damage. Coming off a huge overbought extreme in some of our shorter-term guides, this kind of action can't be considered all that bad - the few previous times our STEM.MR Models cycled into overbought territory, we almost immediately rolled over to new lows in the S&P.

I've been mentioning that I think short-term weakness should help to strengthen our opportunity on an intermediate-term time frame, and I continue to believe that's the case. The argument for even short-term entries is starting to look better, too, now that we've wrung out some of the excesses from last week. In particular, the STEM.MR Model for the Nasdaq 100 has kissed its lower trading band, while the index has held above its breakout from last week, so the setup seems stronger there.

As of:

SPX 1490

HELP ARCHIVE

Good Tuesday morning...We begin the day with a gap down open as a spate of negative news hit the pre-market futures and stocks have been struggling to recover since the opening bell. Financials are dredging the bottom of the sector heap, though that's not terribly concerning to me yet given the magnitude of their bounce last week.

Starting late last week, we've been discussing the likelihood of stocks dropping back after the big run from last Monday's low. Despite a bevy of positive indications for the intermediate-term of the next one to three months, the shorter-term was looking less appetizing, only because stock indices tend to not go up (or down) in a straight line for very long.

I spent a great deal of time yesterday going over a variety of shorter-term setups, and couldn't find much at all to support a strong view either way. In that kind of climate, I prefer to scale back and wait until something with a better-defined edge emerges.

We seem to be getting close to that point, as the weakness the past two days has helped to push some of our more sensitive guides closer to oversold territory, and the S&P 500 is inching towards the 1440 - 1450 zone I wanted to see.

Of course, we run the risk of trying to be too perfect by waiting for that kind of a setup, and perhaps we'll just take off from here, but I'm not willing to bet that way yet. I very much like the probability of a rally into the new year, and would be less discriminating for long entries with that time frame in mind. When looking at the short-term of one to five days, though, I'm still not seeing much that's all that exciting to me.

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