TheRocketTrader's  Instablog

This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.
¹Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.
²The Dow Jones Industrial Average and the Standard & Poor's 500 Stock Index of blue chip stocks, the Standard & Poor's NASDAQ 100 Index, and the Russell 2000 Index are unmanaged indexes representing various segments by market capitalization of the U.S. equity markets.

Week in Review

• Continuing the trend of mixed data signals, the Richmond Manufacturing Index came in below expectations at 5 (versus expectations of 12), but the Chicago PMI came in at a much better than expected 51.6.
  
• Initial Jobless came in better than expectations at 350k.The level of initial claims continues to improve and remains consistent with sluggish employment growth.
• We continue to see weakening consumer confidence. The Conference Board consumer confidence data came in at 65.1 versus expectations of 70 and a previous of 71.5. This number is considered an important leading indicator as it can predict consumer spending, which plays a major role in overall economic activity.
• The lack of progress in DC remains the big news story. It seems incredibly unlikely that a deal will be done prior to the end of the year. Assuming that a deal is done early in 2013, the economic impact should be minimal, but the continued impact to confidence and equity markets may be significant.

(click to enlarge)

The Market Outlook:

The bearish market count still seems the most viable although most major markets continue to hang on to their positive trends for now. The S&P 500 has dropped below the 1411 support line, which significantly weakens the bull case. The next line of support for the S&P is at 1398.

For the week ahead, all eyes will remain on DC - a fiscal cliff agreement will likely lead to at least a short-term market bounce while the failure to reach a deal will likely lead to immediate further downside.

Current Model Positioning:

As we move into the New Year's eve trading day, our models are still indicating a long position across most sectors and indices.

To those not familiar with our trend following system, these are signals subject to change on a daily basis. This is how our models are positioned for December 31st only. Premium subscribers have access to these signals, which we update daily.

*ETFs listed are those used to generate a model signal on the listed index. They do not represent an investment recommendation.