Stock Market Analysis

Monday, December 21, 2009

Nasdaq Composite Leads Breakout!

What an exciting start to Christmas week! The Nasdaq Composite led the way by staging a breakout of its short term neutral channel, gaining 25 points while the Dow gained 85 points.

Sure looks like Santa Claus rally in the making today as the Nasdaq Composite became the first of the 3 major indices to stage a topside breakout of its short term neutral channel. Yes, all 3 major indices have been trapped in a short term neutral channel for the past month and we have been keeping tabs on the Dow on this issue. The Nasdaq breakout today certainly does paint an optimistic picture and setup the possibility that the other 2 major indices would do the same over the next couple of days.

There were no major releases today, so its purely investors' and traders' votes. This surge in optimism was also echoed in the options market as CBOE total equities put call ratio ditched strongly in favor of call options transactions (see Put Call Ratio Graph). Overall, today is a decidedly positive day on average volume.

Such strong performance could almost certainly lead to a profit taking on Christmas eve itself so any short term profitable trades should be profit taking candidates by then.

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

Chart of Dow Made Using Telechart. Want Your Own Charting Software? Download FREE Now!


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