Scott Burrill - Market Notes

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Scott's Market Notes

The Remainder of 2018

Dec 15, 2018

With business travel this week, then switching to Holiday-mode to prep for 2019 and also to enjoy time with family and friends, this will be the last Market Note for 2018. Thank you for listening and more importantly, the timely questions that really just tap the surface of data, experience, and techniques learned and applied over the years.

Let's not dwell on last week since two Notes pointed to potential downside volatility breakouts and the hoped-for Santa Claus Rally. Act II and Santa Claus Rally

Looking forward, we sit on the precipice poised for an expansion in range, but first what are options saying.

The SP500 Weekly Implied Move is + / - 65 points. This means within 68% of the time we would anticipate closing within 2534 and 2665 by Friday's Expiration.

The Weekly Magnet has contracted materially and stands at 2627.50. I would expect this to be tested quickly, and perhaps even in Globex trade Sunday night for upside bias.

Tariff Man has spent his bullets on China Trade Tariffs short-term. It was clear he was trying to juice the market late last week with his tweets, and these were ignored.

The most material potential catalyst is the FOMC Meeting statement and subsequent press conference on Wednesday. The probability for the Federal Funds Rate to increase by 25 basis points is 72%. If the anticipated number of rate increases in 2019 is reduced and Fed Chair Powell provides clarity on the economic outlook and data dependence, then the hoped-for rally may ensue.

Pouring through our database of all indices, sector and industry groups, tells the story of a marketplace dominated by Fear. Only Utilities and REITS stand out as favorable groups with positive money flow.

In fact, the Smart Money Flow Index has fallen off a cliff as have other sentiment readings.

Is the Dow 30 poised to follow?

Markets look and feel poor: That implies opportunity. After all, it remains and will remain a phenomenal Traders Regime.

Levels, and intelligent order / money flow dynamics (not shown), as well as monitoring abnormal derivative-linked ETF trades provide a tactical roadmap of what to anticipate.

Taking the other side since it's gotten too easy being Bearish, the opportunity for a material market-wide rally will be indicated by immediate directional bias in the beaten-down Financials (XLF) and Small Caps (IWM).

Have very Merry Christmas and Happy New Year.

All the best,

Scott

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