Many of Tuesday's strongest performers were beaten-down energy names, but that's OK. Just because Chesapeake Energy (CHK), a stock that's declined more than 76% on a year-to-date basis, was the session's strongest S&P 500 stock (rising roughly 12.5%), that's no reason to assume the entire market is destined to roll back over in the immediate term.
Trendline resistance still exists on the E-Mini S&P 500 futures (Es) up toward 2097 to 2105 (we broke above intermediate trendline resistance near the mid-2050s during Tuesday's auction). So as far as the immediate time frame is concerned, there's no reason bulls can't auction prices another 25 or 30 handles higher before intermediate time-frame traders (primarily those focused on the two-month channel between 1990 and 2100) begin to step away from the bid.
As we so often discuss, shorter time-frame traders should continue to respect the trending strength of the five-day and eight-day exponential moving averages (EMA). Remember, even though price traded beneath those two reference points during Monday's selloff, we saw responsive buyers step in and trigger bearish excess (from the mid-2030s). The end result was price closing well above both our shortest time-frame moving averages. If you're trading during the final two sessions of 2015, and your time frame is measured in hours rather than days or weeks, don't worry about why the market is moving higher. Simply monitor your shortest time-frame trending indicators and go with the flow.
As far as the New Year is concerned, there really isn't anything magical (from a technical standpoint) about the calendar rollover. Let's pay attention to where the Es is trading in relation to its two-month, 1990 to 2110 price channel, and how we're trading around our preferred short and intermediate time-frame moving averages. A sudden drop back beneath the low to mid-2050s would leave bulls in a vulnerable position heading into the New Year. But as long as we're closing above the five-day and eight-day EMA, I see no reason to be particularly bearish.
Moving on to Wednesday's auction, we'll want to begin the session with a focus on 2071.25. As long as value remains above the low 2070s, I see no reason bulls can't continue to auction prices toward 2081 and 2086.25.
Failure to maintain momentum above the low 2070s doesn't switch our focus from bullish to bearish, but it does open the door to selling toward 2064.75. Assuming only limited trading (no value migration) occurs beneath the mid-2060s, any decline should be viewed as inconsequential. Only a continued selloff and session close beneath 2054.25 would carry more bearish implication.
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