Stock Market Analysis

Sunday, December 27, 2009

Happy New Year Week!

Did you enjoy your Christmas? Well, its more holiday this week with New Year coming up on Friday and another half day trading on Thursday. Yes, exactly the same as last week and I do expect the trading action to be somewhat the same as well.

It was a low volume, bullish week last week with the Dow gaining 211 points and the Nasdaq Composite gaining an awesome 105 points. Yes, this is the Santa Claus rally. The Santa Claus rally is a rally that happens during the Christmas and New Year week and has happened 8 out of the last 10 years. As the Santa Claus rally usually last through January of the following year, it is also known as the January Effect. There are also good underlying reasons for the January Effect as institutions take up positions due to tax considerations. The S&P500 also broke out of its short term neutral channel last week and with the Dow now right at the top of the channel, I would expect it to also break out this week.

For now, the Dow remains in short term neutral trend within an intermediate and long term bull trend.

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