Don’t Bet Against a Slow Market

Monday was a rather quiet day in the markets following the one-two punch of Thursday and Friday. As I discussed in the previous Daily Market Outlook, stocks have a tendency to lull in an options expiration hangover the Monday following a big quadruple witching expiration like Friday’s.

Calling around Wall Street desks on Monday, I got a strong sense of thinning crowds. A notable number of folks had already checked out for the year and those that did pick up their phones were more focused on holiday plans than the tape. So this is a good time to remind you not to bet against a slow market. When Wall Street ranks are thin, buyers have an easier time pushing stocks higher.

A rally in the last 30 minutes saved the day for the bulls. This begs the question, “Is that you, Santa Claus?”

The Nasdaq 100 led the rally, and the popular PowerShares QQQ ETF (QQQ) bounced off horizontal support, which is just above where its 100-day and 200-day moving averages are situated. This certainly does not make a trend, but from a technical perspective it is important to note where the bounce took place.

QQQ Chart
Click to Enlarge

The S&P 500 also bounced off horizontal support — so far so good but, again, no victory lap for the bulls or Santa for that matter.

Horizontal support for the S&P 500 around the 2,000 mark coincides with the uptrend line from late September, as well as diagonal support from the summer highs. This puts a good deal significance on the 1,990 to 2,010 area as support. The next attraction area on the upside is the 2,040 to 2,050 area.

S&P 500 Chart
Click to Enlarge

Other than that, as I discussed in Monday’s missive, the energy sector, and specifically oil prices, holds the key to a potential year-end rally and possibly into the first quarter of next year.

Oil continues to get obliterated and bearish positioning is getting extreme. Through the lens of a contrarian, this increasingly sets it up for a strong countertrend bounce that could also help equities lift.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

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As of this writing, Serge did not hold a position in any of the aforementioned securities.

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