S&P; DOWN % THURSDAY, UP 1.7% FRIDAY

TIME TO TAKE OUT THE UPSIDE STOPS

If you haven't noticed the stock market doesn't always cooperate with your wishes. After it rallies and looks as if it's about to make another leg up, it comes crashing down. And vice versa on the downside. We don't need to keep going over that but the point we are trying to stress is that the markets can have a great overall tone one minute and then be completely decimated one second later by any number of headlines. This is especially true when you have both sides of the pond in trouble at the same time. As long as the hard choices are not made the debt is going to keep piling up with zero rates the long term outlook is not good.

This goes with what the Pit Bull taught me many years ago and it has a lot to do with how the public gets in trouble. The markets sell off and then rallies.  Bull market right? No it is not a bull market, it's a bear market bounce; and throughout history, there have been some really big ones. Like the bear market of 1970s when the market sold off, rallied big and sold off even harder. We all look forward to brighter days and to push forward and to do it we are going to have to figure out new ways of doing it.

More and more people are deciding to “go it on their own” when it comes to the stock market and with the right tools we think that's the right way to go. NO, we are not saying liquidate your mutual funds and retirement funds just yet but we do think there is a new breed of investors out there that what to “learn to manage their own risk” That does not necessarily mean buying and selling minis S&Ps or trading crude; it means learning to make educated decision about how to manage your money.

For years one of the best way to invest was the “buy and hold” way of investing but when people can't pay their bills and already down 50% the prospects of losing the other 50% makes people pull out or freeze up and do nothing. Also not sounding so good is what is going on Europe over the weekend. They say while the Europeans are trying to get an agreement but President Obama issued his sharpest warning yet about the German-led solution. The US president said the focus on “long-term political and economic change” is well and good but emphasized that failure to “react quickly and strongly” to market forces threatened the euro's survival in the coming months.

It's 5:30 am and the SPZ is down 8.8 at 1244.20, crude is down $1.28 at 98.13, gold is down $32.4 at 1,684.40 and the EC is trading 132.66, down 105. In Asia 7 out of 11 markets closed higher. In Europe 12 out of 13 markets are trading lower (DAX down 1.22%) The main headline this morning “Shares to Open Lower; Moodys Warns on EU Ratings”.

Our view? Get your Bull Hats on were going up. First today is the busiest shipping day of the year for FedEx. Secondly, the Monday before the Triple Witching has been up 7 out of the last 10 occasions. Then we have the mid-month re-balance where the mutual / investment funds buy small cap stocks at mid-month, next is the December Triple Witching week has the S&P up 21 of the last 26 occasions and lastly the December Triple Witching Friday has the S&P up 20 out of the last 28 occasions.

Can you say “BUY STOPS?” Based on the current price action we are looking for “Mutual Fund Monday” It could be that the SPH is faces with some early weakness. If the SPH opens sharply lower we learn to buy the open or the first 2 to 4 handle drop. One way or the other they take out the stops this week above 1261 in the SPH.As always PLEASE use stops and keep an eye on the 10 handle rule…

VOLUME 50k SPZs, 46k SPH, 1.14mil ESZ and 2.4mil ESHs traded
SPREADS: 29k SPZ/H and 470 SPZ/M spreads traded
FV:  S&P, NASDAQ

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S&P; DOWN % THURSDAY, UP 1.7% FRIDAY

Was Friday's post European Summit and the subsequent market action a sign that traders expect the Euro Zone to avoid further, more significant deterioration as the central banks stand at the ready? Not so fast, there are plenty of cross currents to go around and around. Last Thursday, Texas Instruments cut its 4th qtr outlook and early Friday morning DuPont lowered its full year profit outlook as slower global growth concerns continue to mount in time for earnings season and the December seasonal strength.

No real damage was done last week as the US equities were able to recoup Thursday's sharp losses as risk was back on. The broad based equity rally was in part due to Thursday's weakness, as well as Friday's European Summit comeuppance. Although the European leaders agreed in part, headlines continued as though no one in the Euro Zone can agree on who, what, when and how they will back stop the contagion. Now, we can look forward to the FOMC meeting – Oh Yea!

Friday started with 430k ESH and 1.8 ESH traded on Globex, trading range 1243.75 – 1222.75 marking the low since turkey day. Friday's RTH's opening range was 1234.00 -1233.20, traded an early LOD at 1233.00 before stepping higher throughout the day. By the end of the day, the 30yr bond was down over 1.5 points and the VIX (fear indicator) was down about 13% to 26.38. The financials were a leading market indicator, but some traders would call it a dead cat bounce versus overwhelming sector strength as the sovereign debt crisis wears on. These are not only uncertain times for long term investors, but traders have been anxious as the markets have been turning and churning in the upper end of the recent range.

As some of the bulls watch the TRIN (pressure gauge) which has closed between 1.07 to 0.53 on 6 of the last 7 trading days. Some guy named Dweir posted that – on Thursday the TRIN closed above 4, in Dec this has only happened 4 times, it marked the low for the month. In 1943 the rally was 4%, 1945 1.8%, 1950 3.8% and 2008 11.5%. Friday the spoos closed just off the day's highs. It appears Santa is quite busy in his workshop – deciding which presents to deliver to whom…

Friday's MrTopStep's Video  Eubie on the CME floor  http://mrtopstep.com/2011/12/12-9-11/

MrTopStep Talks Benzinga Radio http://mrtopstep.com/2011/12/mrtopstep-talks-benzinga-radio-wrapup-4

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CONTRIBUTORS' CORNER

 SPX  CHARTS ~~Bob Lang, ExplosiveOptions

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