“IAM” is the online name of one of our professional trader friends who writes a respected private newsletter to be shared with just a few friends and colleagues. He lets us share the newsletter with you, our readers. We offer it to you largely unedited, so you can see how professionals think and what they talk about. All views belong to the writer.
Last week, Radar suggested a little more upside into New Years may be in the offering and a little more good cheer. First, we needed to hold value from the prior week and work higher. The primary target was 2071.75 the quarterly Mode in the ES. Alas, the week and the year are complete and we did hold value, we did get to the Mode and the selling came in. The market made a complete run through value to rest at the Weekly IB Low area of 2036’s. Why did we sell off to 2031’s? It was Volume Value Low for December in the S&P 500. We did get a bounce off the low to settle at the Weekly IB Low area of 2036’s.
Here is a snippet from last week’s article: “Three weeks ago it began discounting the third consecutive quarter of downside earnings revisions. We go from 2097.25 to 1983.25 then 2059.75 with a settlement at 2051.25. GDP came in at 2%.”
Radar is going to make a focal change in observing the S&P 500 index versus the ES. It has been working on the change over the last two months. Its hope is to make the entire audience better served and the traders at the same time. Radar will use both in writing and observing so make sure you note the change!
We are in No man’s land. On the one hand we see promised and hoped for earnings for 2016 at/near/around $127.22. At the same time January 11th we will have a flood of companies stepping into the earning confessional. Last week the market tried to hold for a record seventh consecutive calendar year of broad-based equity gains; couldn’t do it!
This will be the last week before the flood of earnings.
On the upside, the S&P 500 will need to hold 2031’s and value to work up to 2043’s/2056’s/2067’s/2078’s and try to extend value. Seems like a rough heavy load to Radar, especially with earnings season approaching.
On the downside, if the S&P 500 cannot hold 2031’s and hold value, then the above areas will likely prove resistance. Downside targets of 2025’s/2013’s/2000 and Rule of 10 would still apply. Remember the first test of disappointing earnings revision took us to ES 1983.25 with a successful retest of 1993.25.
For Traders: Radar will look to declining developing value highs, VWAPS, Modes, VPOC’s etc. to initiate short trades this week. Too many unknowns are still heading into quarterly earnings, not to mention headline releases.
For Longer Term Investors: Hope and consensus is still looking to 2% GDP Growth and $127.22 eps for the S&P 500 December 2016. Hope would suggest higher prices before this Bull is forked! Radar anticipates continued stingy gains on this premise. In the meantime, the market will still have to work through a stronger dollar, declining commodities prices, the potential High Yield mess a third consecutive quarter of an earnings recession and the like. This economy is still adding jobs and the bank isn’t offering much. Stocks are fully priced and hopeful.