Stock Market Analysis

Sunday, December 20, 2009

Welcome to Christmas Week!

Welcome to Christmas Week!

Yes, this is a holiday shortened week with half day trading on Thursday and Christmas holiday on Friday. In fact, many people all over the world are already on holiday and won't be trading this week. Looking back into history, the SP500 has been up on 8 Christmas weeks over the past 10 years with significantly lower volume on most of them. So, will the santa claus rally come back this year?

On the news front, we have the GDP on Tuesday and Durable goods orders on Thursday, both are important economic numbers that will certainly provide a catalyst for a Santa Claus rally if they turn out better than expected (see Stock Market Calendar).

On the technical front, the Dow continues to trade within its short term neutral channel with no signs of a breakout. This short term neutral channel is a tight one bounded by 10250 and 10500. Since it is once again at the bottom of this channel, it will not be surprising to see the Dow go upwards this week back up to the top of the channel. The only question that remains is, will there be a breakout? I maintain that the probability of a topside breakout continues to be more probable than a bottomside breakout.

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

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