Squawk Morning Briefing: Remembering Thanksgiving

Thanksgiving week can make for some difficult trading as much of the volume comes out of the market after we get past Monday and Tuesday. That doesn’t mean we won’t see any movement, it’s just that without the usual volume and market participants the moves can be wild and unpredictable. Last year presents a good example of movement during Thanksgiving which was reversed after traders returned from holiday.

If you recall 2011 you might remember that we entered Thanksgiving week after several weeks of declining prices in the U. S. equities. The low participation didn’t stem the decline, with the DJIA giving up several hundred points on Wednesday. The index sold off even further during the half day of trading on Friday. Yet markets erased both of those moves the following Monday. The lows made during that holiday week represent as lasting swing low that hasn’t been revisited since.

As we prepare for Thanksgiving week 2012 there is an important cautionary tale beyond simply reminding ourselves that it can be a difficult week. In 2011 the multi-week decline which began in late October was starting to show some impulsive characteristics. Of the two legs down, the second was much longer than the first and it appeared to be gaining speed. Furthermore, this was occurring in a spot which would would have allowed for us to consider the top in. In this way, the situation was not much different from what it is today. However, the decline from October, 2011 never extended into five waves and, therefore, even though it looked promising it never served to confirm a change in trend.

It would be unwise to take the wrong lesson from that one example. We are not suggesting that the same scenario will play out this year. Instead we need a reminder that things can go either way prior to confirmation. As probabilities shift we favor one outcome over another but not to the exclusion of alternate scenarios. We have not yet seen a complete five waves down from October, 2012 and we haven’t seen a subsequent corrective recovery.

As we go into Thanksgiving week, let’s also keep in mind that the later in the week we go the less important the moves become. The traders who hang out at their desks until late Wednesday don’t move the markets much and the ones active Friday morning move them even less.

We will publish our final update for this week on Wednesday morning. If there is a particularly dramatic even on Wednesday we will send out a brief note but otherwise we will resume our regular schedule on Sunday evening.

Read the Rest Now

The rest of this article is available to subscribers to the Elliott Squawk newsletter. Subscribers can login here to view the update. If you would like to receive this content, signup now for immediate access.

The Elliott Squawk Newsletter

Elliott Squawk delivers thorough market preparation every morning in time to take action during the trading day. By combining up-to-the-minute futures activity with traditional end-of-day analysis from cash indices, you receive analysis based on the latest conditions as the trading day sets to open. Each issue of Elliott Squawk goes beyond traditional Elliott Wave analysis because we recognize that trading Elliott Waves is much more than just looking at the most likely current count. Squawk will prepare traders to assess the market action as it unfolds by answering questions that any Elliott Wave trader should consider:

• What price levels and wave motions would confirm an expected move?
• What price levels would make an alternate scenario more likely?
• What technical indicators should be watched throughout the day to interpret wave action?
• What intermarket movements merit special attention to understand likely price trends?

Markets Covered:

Each day Elliott Squawk will update the outlook for the following markets:

• The Dow Jones Industrial Average
• YM e-Mini Dow Futures
• The S&P 500
• The EUR/USD cross
• The U.S. Dollar Index
• U.S. Treasury bond futures

From time-to-time when circumstances warrant, Squawk will present analyses of other markets that help interpret wave action in a covered market. For example:

• If S&P 500 and Dow counts are ambiguous and NASDAQ behavior helps identify the likely next move then NASDAQ analysis will be presented.
• If the EUR/USD count is ambiguous and the USD/CHF cross helps us to understand what might happen then we’ll present the intermarket analysis the Squawk subscribers.

At the end of the day Squawk subscribers will receive a brief market recap that summarizes how the day’s events compared with expectations and what issues are likely to be analyzed in the following morning’s Elliot Squawk.

About the Analysts

Kevin McEwen and David Starr are best known to First Wave chat room participants as Kevy99 and Managematics and by their reputation for their Elliott Wave counts that have predicted market turning points. Kevin has been counting Elliott Waves for 28 years, successfully forecasting market moves in virtually every financial environment. David brings together talents in financial market analysis and software development to his wave counting. He has authored many of the studies used by First Wave Traders as well as a number of proprietary studies to aid in counting waves.

To receive daily Elliot Squawk updates and get immediate access to this article and the entire archiive signup now.