Bearish Harami Pullback

DJIA - 242.85, -2.72% SP500 - 21.03, -2.31% NASDAQ Comp. - 24.10, -1.50% Russell 2000 - 15.67, -3.26% Exchange NYSE NASD Advancing 1,266 962 Declining 2,581 1,905 Oil $42.07 -$1.64 Gold $772.40 +$5.00 SOX 205.65 +9.50 VIX 58.91 +0.42 Strongest Sectors: XLE +1.00%...XLK -0.64%...XLB -1.06% Weakest Sectors: XLF -4.02%...XLY -2.01%...XLP -1.93% Sector Watch Up Trending: Sideways: XLE, XLP, XLU Down Trending: XLF, XLY, XLV, XLI, XLB, XLK Monday evening we had 250 people join in our TA webcast. In the session we pointed out that while the short-term trend was up we expected stocks to pullback in the next 1 to 2 days. We pointed out the upper reversal zone reading on the momentum and near term line, the lack of weakness in the VIX on Monday when the SPX was up strong and the relative weakness in the SOX index compared with the Nasdaq and other broad indices as our reasons for a pullback. We also mentioned the SOX strength could simply be delayed as it was last week on Dec. 2 as the Nasdaq rose and then made a strong move on Dec.3. Interestingly enough that is exactly the way it happened today. The SOX found buyers on Tuesday as the index rose 4.84% even though the broad indices were lower. TXN traded over 34 million shares (average 17.9 mil.) while rising 4.93%. Other SOX leaders included: NSM, MRVL, AMD, MXIM, BRCM, LLTC MU and ALTR. (click images to enlarge) ProphetCharts We also stated this might be a bull flag type of pullback and to look for a potential higher low following the inverse head and shoulders breakout on the indices on Monday. The SPX, Nasdaq and RUT showed some early strength until 11 am ET on Tuesday when the expected pullback began to materialize as sellers took over. The VIX was relatively weak compared to the drop in the SPX suggesting fear was not rampant in Tuesday’s selling. Only one Sector ETF Energy, XLE, rose on Tuesday and that was even with oil prices falling $1.64 to 42.07 a barrel. The Financial Sector, XLF, which has been the strongest sector over the past two weeks, was the weakest sector on Tuesday.

Index Commentary The DJIA formed a bearish harami as it pulled back to its 30 DMA. The SPX formed a bearish harami as it pulled back to its 30 DMA.

The Nasdaq formed a tombstone doji as it pulled back to its 30 DMA. The RUT formed a bearish harami and shooting star like pattern as it closed just below its 30 DMA. Stocks to Watch on Wednesday Leading Stocks: Holding Above 30 DMA AXYS…AYE…EZPW…PCLN…ASIA…BAP…DLTR…ESI…FLR…FSTR…TKC…JCOM…JEC…PCR…ATK…B…IRIS…MIG…RTN…SNA…WMS…HAS…JOSB…URBN…AGN…AMZN…AFAM…AME…ANSS…BIIB…BYI…DECK…ESRX…HDB…ICON…LFC…MCRS…NILE…PSSI…AAPL…AMX…AOB…CERN…CTSH…FWLT…GME…ICLR…IT…JW.A…MON…MTW…NDAQ…NEU…NIHD…QSII…RIC…SNHY…VMI…WAB Moving Above 30 DMA = 4 MOS…OI…PPD…PRXL Moving Below 30 DMA ACL…AIRM…AME…BRKR…CBST…CCC…CHTT…CHU…EPR…GILD…GIS…MTD…MYGN…PRGO…PTNR…ROST…TECH…TEVA…VIVO Staying Below 30 DMA DGIT…LAYN…NOV…OSIP…RIO…SINA…SOHU…SWN…MMM…FLIR…PCP…PETS…SPTN…STRA… BCR…CL…DV Tuesday’s Action Moving Up: MON, BRCM, MOS, SCHN, AGU Moving Down: FSLR, MA, GS, V, ESRX, SOHU, PCLN, UAUA, KRE, MS, ZION, LCC, FWLT, KBE, INFY, RF, COH, CLF, ANR,X, STRA Intermediate Term Market Trend: Neutral – DJIA, SPX, Down – Nasdaq, RUT Short Term Market Trend: Up