Bearish Engulfing Patterns

Today's end-of-day losses were disguised by the relatively light declines at the close. Markets opened strong, but were unable to maintain premarket strength. The consolidations in place since the 'Santa Rally' are holding on, but markets can ill afford additional losses from here.

The S&P finished on the 38.2% Fib retracement of the 'Santa Rally'. Aggressive longs may view this as a head-and-shoulder reversal; if this pr-oves to be the case then markets have to rally from the cash open. The S&P is a case in point.

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Sharp Reversals on Economic News

It has been a while since something other than Central Banks have moved the market. This time, it was the turn of old fashioned Durable Goods to upset the party. The loss was big, but it's still noise within the bounds of the 'Santa Rally'.  Consolidation breakouts remain in play, although volume climbed to register distribution.

The S&P crossed below its 50-day MA, but it's a flatlined moving average. Technicals are mixed.

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Small Caps Outperform.

A good start to the week was kicked off with Small Caps adding nearly 1%. The Russell 2000 hasn't reached a point of challenging major support or resistance, but today's action cleared the 20-day MA, and accelerated the relative advance against the S&P. Technicals for the index also shifted net bullish.

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Three Charts to Watch

A bit of a hodgepodge of charts to review. I'll start with my favourite of the bunch: the relationship between oil and gold prices. Peaks in the relative price between these commodities have historically provided swing lows for commodities - oil in particular. Certainly, sufficient time has passed between peaks to mark a major low.

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Indices Breakout - Head-and-Shoulder Reversal in S&P Negated

ECB action ruled Thursday's action across global markets and currency pairs. For many indices, it marked a pause in the New Year decline, but many of these same markets remain range bound by December's swing lows and the end-of-year highs. From a trend perspective, nothing has really changed.

The S&P finished above a converged, yet flat-lined 20-day and 50-day MAs. There was some technical improvement with a fresh MACD 'buy', and a marked accumulation day leading to a 'buy' for On-Balance-Volume, but whipsaw risks for each of these signals remains high. Bulls would probably be best served by some tight action just below 2,100, then a break higher. It does look like the bearish head-and-shoulder reversal is done, at least in its prior form.

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Semiconductor Index Phase II Breakout

There were small gains, but again it was the Semiconductor Index which had the best of the action. It inked a second, modest breakout, but there is still another declining resistance level to go before it starts challenging highs. Watch for a MACD trigger 'buy'.

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Semiconductor's (Very Modest) Breakout Phase I

There wasn't much on offer by the close of business as early losses were returned by the close. The Semiconductor Index may have had the best of the action, although the relative gain was small. The index crept over declining resistance, but has another resistance level to challenge soon. Support at 659 remains in play, but if it breaks it becomes a shorting opportunity.

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