Weekly Review and Outlook: Dec 4 - Dec 8

Porch time.

Image 1. Waiting for some action. Gun is loaded.

In the last weekend note I wrote that it was up to buyers to drop the ball at these levels around 4600, and they have not disappointed unlike the sellers from just over a month ago. This made for a historic rally into the end of the year. Bulls continue to grind up but the 4600 is providing a fair amount of resistance yet. The threshold of 4630-50 that I mentioned could lead to new ATHs is close …but sellers continue to unload inventory. However into willing buyers.

This has resulted in a quiet week altogether. Just over 60 points of range. In fact, our plan for the week ahead will see familiar levels, if a slightly different pivot. Are we gearing up for a larger move? I think so - but with unemployment data on Friday we may see some further consolidation yet. Recall this is one of two components of the Fed mandate - not trade balance, not equality, not federal debt…but stable prices and employment. Powell will remind you (and every congressman) of this at every hearing.

Week in Review

As a slight joke in last week’s outlook I shared a cover picture of Jordan’s 1990 performance, not the most memorable one in terms of a ‘long shot’. I had a slight bias long with the caveat that “Until we see a couple of closes above 4600…we are in a bit of a no man’s land” and this really summed up the week’s action.

The high of the week pinged only one point under 4609 which was a level I mentioned multiple times in the weekly (and daily) plan. The overall shape of the week was one of a ‘b’, indicating seller absorption, with a tentative breakout on Friday. Despite this we did close Friday at 4603, below our weekly extreme targets. Longs haven’t won yet.

Image 2. Weekly structure. Note the tight range and double distribution.

Below we still have a series of unfilled gaps, the closest at 4434, 170 points below. Much further above is the 4550 level to weekly VWAP at 4571.50; this will be an important reference area for early support in the week. Finally, longs will likely be eyeing 4630 as the gate to new yearly highs on the possible road to 4700. As a near-term metric of strength, 4583 level of Friday breakout into weekly highs can serve as a pivot. This should give clues early on as to positioning into Friday’s data, which I think has more significance than Tuesday’s JOLTS.

Image 3. Medium-term areas of balance

Read below for weekly levels.

Next Week’s Outlook

Refer to 4583 as a weekly pivot. A couple of closes above 4630 can gate to higher prices as sellers will be underwater. A stronger sell could take place below 4520.

We are OTFU on all timeframes - clear buyer control.

This week’s references:

• 4670 to 4695

• 4634 yearly high

• 4616 July balance VAH

• 4603 PWC

• 4583 weekly pivot

• 4565 Nov POC

• 4545 end weekly OTFU

• 4520 balance POC

• 4484 excess

• 4437 gap fill

a) Buyers closing above 4616 July balance VAH will likely target yearly high 4634. The psych level 4650 and buying imbalance at 4671 are further targets where sellers are likely to be found before 4700.

Buyers’ LIS is balance POC 4520.

b) Sellers spending time below pivot can lead to a possible test of 4545 PWL. A close beneath suggests the next logical target 4500, which likely sees passive buying along the way. Buying tail 4484 further below.

c) We are data light this week with JOLTS on Tuesday and unemployment Friday. VIX is at some very long-term lows and suggests a reversal - but if I were to give a VIX ‘pivot’ that would certainly be 14.30. I think a similar role could be seen in AAPL at 187.50, given how much this one stock correlates to overall market strength.

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