Post-market Analysis December 10, 2008

Occasionally, my accuracy in predicting trading ranges amazes even myself. Today is yet another example. In the morning, I opined that breaking above 910 is bullish and breaking below 885 is bearish. Today's S&P traded a high of 908 and a low of 885.

Aside from my existing intermediate term long positions, I am effectively neutral-bullish for the short term, and still bullish for the intermediate term (as we're still in my bullish channel as shown in Figure 1).

[caption id="attachment_956" align="aligncenter" width="500" caption="e-mini S&P 500"]e-mini S&P 500[/caption]

What do I mean by neutral-bullish? Although the current rally seem to be losing steam and there are still many skepticism, the market internals still seem strong to me. Notice yesterday when S&P tested 885 in Figure 2, the TICK made a low of -1426 and the Advance-Decline line was about -80. When we tested 885 today again, the TICK remained above -1000 and the A-D line was at about +80. This is a textbook perfect bullish divergence scenario.

Frankly, I have been waiting for signs of this rally to break down these couple of days. So far, I haven't been able to spot anything concrete. Until that happens, I'm happy to ride up the stream on this shaky boat.

[caption id="attachment_957" align="aligncenter" width="500" caption="S&P 500 and NYSE internals"]S&P 500 and NYSE