The last hour of trading has always been important, but it should be particularly important today.
The S&P 500 has not closed at or near its lows for the day very often at all since the October lows. In fact, before Friday, we’ve only had two days since mid-October where the stock market has closed at/near its lows on a down day (October 29th November 7th). Yes, it also closed at its lows on November 4th and 5th, but those days were ones where the market traded in a very tight range…and pretty much “unchanged”…all day. (In other words, they were not “down days”.)
Back in mid-October, the S&P tested and held the 2840 level on 3 different occasions. Since the third and last “test” of that support level on October 23rd, the market has rallied very strongly (as we all know). Only on October 29th and November 7th…did we get a day where the market fell by a meaningful amount…AND closed at/near its lows for the day. On the flip side, more than half of those 29 days have given us closes at or near their HIGHS for the day! (The rest, of course, saw a close in the middle of their daily ranges.)
However, the multi-week trend of closing well off the lows for the day changed over the past two days. Of course, Friday was only a half day, but today is another one where a “down day” could fail to see a late-day bounce. If that does indeed happen, it will make three days in a row. Therefore, if the stock market fails to bounce in the last hour of trading today…and instead closes at its lows (especially if those lows are a lot lower than where it’s trading right now), it’s almost certainly going to take some confidence out of the market on a short-term basis.
We’re not saying that it’s going to create a major downdraft by any means. This is just a short-term thing. However, the all-important “last hour of trading” has been very good for well over a month now. Thus, if that trend looks to be fading, it we could indeed get the kind of 4%-6% decline we talked about this morning. That would not be the end of the world, but it could/should scare a few people as we move into the middle of December.
Of course, if the market rallies nicely in the last hour today, it will be positive, but we'll still be on the lookout for more days where the last hour is not very bullish...now that the trade issue is suddenly back on the table.
Matthew J. Maley
Chief Market Strategist
Miller Tabak + Co., LLC
Founder, The Maley Report
275 Grove St. Suite 2-400
Newton, MA 02466
Although the information contained in this report (not including disclosures contained herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. This report is for informational purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. Any recommendation contained in this report may not be appropriate for all investors. Trading options is not suitable for all investors and may involve risk of loss. Additional information is available upon request or by contacting us at Miller Tabak + Co., LLC, 200 Park Ave. Suite 1700, New York, NY 10166.