Stock Market Analysis

Monday, December 28, 2009

Santa Claus Rally Dying?

Optimism continues in the market today as buyers took back lost ground by the end of the day closing the Dow up by 27 points.

Volume returned to the market slowly today as buyers fought back profit takers, continuing the santa claus rally into its 6th consecutive trading day. The Nasdaq composite also continued its rally, closing up 5 points. However, what is evident today is that the rally is getting tired. The Nasdaq composite closed the day with a topside doji candle which might lead to an evening star if it close lower tomorrow. Being already in a deep short term overbought condition, a lower close tomorrow leading to a slight 3 to 5 days retreat for the Nasdaq composite seems to be in order.

Both the Dow and the S&P500 closed significantly above their respective short term neutral channels but I would still be hesitant calling them breakouts as they lack the volume and power of a real breakout. They behaved more like a "Sneak Out" rather than a "Break Out", which could come under pressure if the Nasdaq Composite, which has played the role of leader so far, retreats as I expect it to. Which is why I would still classify the Dow as short term neutral for now.

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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