The market traded in a tight range today which often occurs ahead of the closely watched Non-Farm Payrolls report due out at 8:30 Est on Friday. Economists’ are predicting the number to come in at 115k up 21k from last months report. While this one event can often create a tight range bound market ahead of the data release, I think there are a few other factors at work.
I am still in the opinion that we will see short-term weakness over the next few trading sessions given the technical extremes that we follow. The S&P is still in an overbought state while the other major indices ahve moved back into neutral territory and the momentum and stochastic measures that we follow on SPY are at extremes. Furthermore, today marks the last day of the bullish seasonality that typically occurs during the first few trading days of December.
One additional note, typically when we see a tight, range-bound market we often witness weakness in the market over the next few days. As I mentioned before this could be a result of the jobs report due out Friday and given the low volume today it most likely is a major factor for today’s sideways movement, but as I mentioned before there are a few other nuances that we should consider in the current trading environment. I expect to see weakness over the next few days, but if the market continues to hold up amid all of the weakness that has recently invaded the market then I will have to reconsider my short-term expectations as we move into the first few trading days next week. December can be a very tricky month for traders so remember to stick with your trading guildelines and money management techniques.
Have a wonderful night and as always I will be back tomorrow afternoon!
RSI Wilder (5) for December 6, 2006
- SPY - 71.4 (overbought)
- DIA - 64.1 (neutral)
- IWM - 64.4 (neutral)
- QQQQ - 55.9 (neutral)
Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com