I will be focusing on my family and taking a bit of a break over the next two weeks, so there will not be any commentary during this period. However, should there be any major moves up or down, I will respond by issuing a report the for the next session, otherwise, I will be focusing on a report due out on January 5th which will be the next report to be released after this one.
The report will be detailed with a longer term outlook so that it will help to give a perspective to begin the New Year.
I also want to take this opportunity thank all of you for yet another record year at VPM Partners and for all of the incredible complements that you have sent to me about what VPM did for your business and your customers.
While VPM saved billions of dollars of losses for your customers and helped to preserve the capital in your practice. It is important that you understand that VPM could have done nothing for your customers if you didn't have the conviction and discipline to follow the suggestions made by our software.
So I want to thank you, for following the instructions and believing in the concepts that I have worked so hard to develop over the 29 years. It is of great gratitude that I write this to you, as I have worked hard, as you folks have, to preserve our business and move them forward.
2008 was an historic year and to have survived this type of incredible risk is very gratifying. I pledge to all of you to continue to expand our software's capabilities and to remain engaged in the markets at very high level to help all of us to get through the next market cycle as it unfolds.
2009 will present many more challenges, but it is nice to know that everyone that is associated with VPM will never walk into their offices not knowing how to respond to market conditions. It has been an incredible honor to help you folks to navigate through the markets!
Thank you for your business and commitment to this process as it is greatly appreciated.
I will wish all of you a very safe and happy holiday season!
In looking back at last week, the markets were basically flat, but it was actually quite a week for observers of the stock market. By just looking at the technical side of the markets therefore suggesting that "the tape tells all," you would have missed a lot.
Over the past year and change I have characterized some of the fed actions from a gaming perspective, so as of last week the Fed has now completely pushed "All In" as they threw everything they could find – including the kitchen sink – at the credit crisis and the economic problems. The action made it clear that the banking system is still locked up and that they "The Fed" are the lender of only resort not lender of last resort.
These actions will likely keep the relative bid for all treasuries's locked in for now. The Feds actions continued to push yields to generational lows last week, but it is not about yields it is about the capital preservation. Therefore, it is the "return of your capital not the return on your capital" that continues to drive sentiment. While mortgage rates continued to decline as the average on a 30-year fixed mortgage fell to 5.17% down from 6.14% it will have little effect as the same problems still exist; which is obtaining jumbo loan financing or just getting financing on just about anything.
Yet through it all, the major stock market indices barely budged. The DJIA actually gave back -0.59%, while the S & P 500 rose +0.89%, and the NASDAQ gained +1.53%.
So, is there anything to take away from the market's relative lack of movement last week?
The answer is no!
While the markets have continued to consolidate, it has become a coin toss on the next 100 point move on the S & P 500. There still remains the possibility that the markets have seen a low of this particular sequence but that is yet to be seen.
I am still expecting that the market will remain locked in the range basis S & P 500 between 800 and 920 levels for the next several weeks. If anything there is still an upward bias but that can change quickly.
As you would expect volume is likely to be down, but volatility could increase during the next 8 trading sessions to complete this year. It is unlikely that not much will happen until the first full week of the New Year that begins on January 5th.
Index | Started Week | Ended Week | Change | % Change | YTD % |
DJIA | 8629.68 | 8579.11 | -50.57 | -0.6 | -35.3 |
Nasdaq | 1540.72 | 1564.32 | 23.60 | 1.5 | -41.0 |
S & P 500 | 879.73 | 887.88 | 8.15 | 0.9 | -39.5 |
Russell 2000 | 468.43 | 486.26 | 17.83 | 3.8 | -36.5 |
From a technical viewpoint: the configuration suggests that the volatility is contracting as the price trading ranges have gotten smaller. As I mentioned earlier, I don't expect the market to make a big move up or down. But, the best parameters for the next two weeks are as follows: A close above the 908.70 level will project prices toward the 937.65/970.70 levels and a close below the 867.30 level will suggest a move down toward the 839.40/801.45 levels.
I will write a report should any of these pattern be violated.
S & P 500 | Support | Resistance |
| |
1 | 881.45 | 893.45 | ||
2 | 874.95 | 896.70 | ||
3 | 871.35 | 902.70 | ||
Extreme | 867.30 * | 908.70* | ||
*key pivot points
Expect a flat to lower open with a 60 percent probability for a lower close today.
The short-term VPM models have issued 727 new buys versus 227 exits or a positive ratio of 3.20 to 1. The bullish percent is at an overbought range at 77.99 percent long. However, this pattern suggests there is about another 4 to 6 weeks of positive action before it will enter into a liquidation phase.
The intermediate models are also continuing to get more traction as there were 912 new buys versus 109 exits or a positive ratio of 8.36 to one. The bullish percent is up to 12.86 percent which is still about 1 and half standard deviations below norm. I am still expecting that this will get up to around the 22 to 26 percent range during the next 4 to 6 weeks. This is further evidence that a low is in place. As I mentioned in last week's comments it appears that the first quarter will remain in a sidewise pattern with an upward bias.
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