Prior week’s recap:
Our title last week said it all. As we noted, the large up day on December 4th ended up being a head fake and the bears attacked hard all week. With the intraday back and fourth price action you could tell that the bulls were fighting for their life. The week ended with a 3.7% loss. Now we are right at the bottom of the range and the bottom of the 2 large weekly bars from November.
We expect a bounce in the Monday-Tuesday time frame. If we are down big tomorrow we will be looking to get long for a quick bounce into Wednesday. Bulls must make this week count because any weakness or consolidation at the bottom of this range and the bears will be off to the races come January. If the bulls fail 198 and 195 would be the first 2 targets.
Even with the down move last week, the chances of a Fed rate hike are about 80% based on Fed Fund futures prices so this should be a another volatile week.
The small percentage chance 2 weeks ago week did indeed lead to a big percentage change as expected. Bulls are in serious trouble, they need to make the next 2 weeks count. Historically, this is the week the Santa rally should start. If Santa does not show, this is a very bad omen for 2016.
Internals did not improve last week either, they are now as bad as they were at the August and September lows so bulls have some serious work to do if they want to turn this around.
Obviously, this week is all about the Fed and the decision at 2pm on Wednesday. Yellen will also be speaking after the decision is released so expect extreme volatility. This week also has some important reports that will be released. They should help shed light on if the economy is cooling. Friday is quadruple witching so expect some strangeness across the market.
Trend Following Models:
My long term models are Bullish.
My medium term models are Mixed.
My short term models are Bearish.
– Trader Tony