Santa Claus Rally Dying?

The Dow closed marginally higher by 20 points today in yet another mixed trading day amidst better than expected economic data.

Fundamentals
The US market closed mixed today yet again in yet another lightly traded day. Both the Dow and the S&P500 posted marginal gains while the NASDAQ composite posted marginal loss. Despite far better than expected retail sales data and a better than expected investor confidence number, investors continue to be slow and reluctant today as trading volume remained low with an extremely small range of movement. What is encouraging is that even though job data wasn't too encouraging so far, consumers posted the strongest holiday purchase since 2006. Yes, consumers are the backbone of the US economy and as long as consumption picks up, everything else can. And yes, even jobs can return with stronger demand in the market as companies and factories step up production to meet those demand. The next bout of significant economic releases will be made on Thursday with the Jobless Claims and Chicago PMI as the highlight (see Stock Market Calendar).

Technicals
The Dow continued its slow climb today as the Santa Claus Rally continues. However, a significant loss of bullish momentum along with a short term bearish divergence turned up on my short term momentum indicators today which seems to suggest that even if this bull run last through New Year, we might still not see the "January Effect" of old. Traditionally, January has always been thought of as positive months with plenty of academic research supporting the theory but the "January Effect" really hadn't been the norm as Januaries closed significantly lower than the prior December close in most years over the past 10 years. Even those with a January gain posted insignificant ones as profit taking set in on the bullishness very quickly in the month of January itself. Indeed, when an anomaly gets so well publicised and studied, arbitrageurs and their algorithms start coming in to eradicate the anomaly.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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Final Week of 2010

Welcome to the final week of 2010! Yes, this is the final week of 2010 as we invite the arrival of year 2011 on Saturday.

As it is New Year's day on Saturday, US market will be closed early on Friday. The Dow closed higher by 0.65% on Christmas week as it has been keenly anticipated to. This is the 9th time the Dow has closed higher on Christmas week over the past 11 Christmas weeks and we hope you have profited from this anomaly. If you hadn't, well, the good news is that Santa Claus rally tend to last through New Year week. This means that this week would most likely be a higher week as well.

Lets continue to bask ourselves in the season and look forward to a better 2011! (I would also do a wrap up on 2010 and what I expect 2011's market to be like later this week only for paid subscribers.)

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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Santa Claus Rally Continues...

The Dow closed higher by 55 points as Santa Claus rally goes underway on higher holiday retail sales figures.

Fundamentals
Sales data pointed towards a roaring holiday shopping season today, lifting stocks in yet another low volume trading day. Indeed, Christmas week trading has always been light as most people go on holiday for the week. However, that won't stop the market moving yet higher if tomorrow's third quarter final GDP turns in better than expected.

Technicals
The Dow continue to make a cool and steady climb in short term overbought condition. However, there is still no clear sign of weakness in this climb and the Dow might just continue calmly upwards with the November high as short term support into the new year.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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Christmas Week!

Welcome to Christmas Week! The final two weeks of each year are holiday shortened weeks with extremely light trading activities as traders big time and retail go on much needed holiday away from the market.

Last week saw the Dow gaining 0.72% week on week as economic data continues to recover in the US. So, is Santa Claus rally going to come and lift the market higher this week?

Over the past 10 years, the Dow has closed higher on 8 of those years during Christmas week, which means odds does favor a Santa Claus rally this week. The big movers this week would be Wednesday's GDP and Thursday's Durable Goods orders, consumer sentiment and Jobless Claims (see Stock Market Calendar). This is also going to be a holiday shortened week with an early close on Thursday with markets closed on Friday.

Lets bask ourselves in the season and Thank God for Christmas.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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Better Economic Data Continues...

The Dow closed higher by 41 points today on better than expected Philley Fed and lower Jobless Claims.

Fundamentals
Economic data continue to turn in positively today as jobless claims dropped to 420K, housing starts making a comeback and Philley Fed beating expectations by a mile. Indeed, the trend of recovering economic data continues as the US economy continues its rocky way out of recession. In fact, the trend of better economic data is becoming hard not to notice as investors are quickly being convinced back into the equities market, exiting the bonds market strongly over the past few days. Bond yields rose strongly across the board as money moved from bonds into equities. However, much of that money is obviously still looking for a better entry point as trading volume remains lower than 30 days average over the past few days.

Technicals
The Dow continued a healthy climb in an attempt to escape the "gravitational field" of the November high resistance level. However, the volume just isn't strong enough to consider today's gains a "breakout". In fact, the Dow still closed within the trading range of the past two trading days which makes it more of a sideways day than a positive day. Tomorrow is Quadruple Witching Friday. Quadruple witching days usually result in a small sideways day typically closing within 0.35% of the previous day's close on huge volume as derivative instruments are being exercised for the underlying stocks. As such, we should not see a breakout on Friday either.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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Dow Beats November High

The Dow beats the November high, closing up 47 points today, after retreating from intraday high following the Fed announcement.

Fundamentals
The US market started out strong on a slew of better than expected consumer data even though profit taking set in quickly following the Fed announcement in the afternoon. Retail sales numbers released today was better than expected and would likely give support to a better ISM index report next month. So far, it has been a pretty positive year on the consumer side as sales picked up on a year on year basis as indicated by today's data. The Fed decided to keep rates unchanged as expected and that led immediately to a profit taking, taking the market off intraday highs as is the norm for Fed announcement days in recent months. Tomorrow's Empire State Index may continue the trend of better than expected economic data and encourage investors back into the market to take back what was lost today.

Technicals
Today's market action is a healthy continuation of the short term bull trend since the Dow rebounded from its daily 50MA. In fact, the Dow beat the November high by such a slight margin that makes one wonder if we should see a slight pullback over the next two days before the Dow has enough energy to make a clean breakout. The Dow is slightly in the short term overbought condition right now but there are no clear technical indications of weakness yet. As such, the Dow might make one strong day these couple of days before going into a slight retreat.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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Leading Indicators Week

The Dow ended up marginally higher by 0.25% on a week on week basis in a range bound trading week last week.

The market traded sideways last week on light volume due to a lack of significant economic data. However, the mood in the market recovered slightly last Friday as consumer sentiments turned in better than expected. Consumers are the backbone of the US economy, as such, higher consumer sentiment always works well for the stock market. The Dow gained 40 points last Friday on the news, marking the biggest single day gain last week. Every third week of the month is forward looking data week with a slew of data which leads the following month's ISM index. This week's Empire State Index on Wednesday, Philley Fed on Thursday and Leading Indicators on Friday are such leading indicators (see Stock Market Calendar). Adding to the potential volatility is the FOMC Announcement on Tuesday afternoon and the Quadruple Witching on Friday.

The Dow held an important slightly positive week following the rebound off the 200WMA 2 weeks ago. This positive week is extremely important in establishing the strength of that rebound and sets the stage for more possible upside. On a daily basis, the Dow continues to be slightly off short term overbought condition and would thus set the stage breaking the November high.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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Another Sideways Day...

The Dow moved sideways, closing marginally lower by 3 points today as strong profit taking overtook the market in the final hours.

Fundamentals
The US market opened strongly and remained strong for most of the session on the promise of extended tax cuts before succumbing to a wave of profit taking in the final two hours. Yes, there were no economic releases or significant news to account for the sudden wave of profit taking that took place in the final hours. Interestingly, investors sold out of bonds strongly as well, lifting bond yields strongly across the board and that could lead to a return to bonds over the next couple of days on the attractive yield, reducing support for the equities market.

Technicals
Even though today's market action seemed a little pessimistic, it is actually very common to see late profit taking forming inverted hammer candlesticks early in a new leg up as some investors sell out on breakeven after a painful retreat. In fact, we saw numerous such inverted hammer candlesticks on the Sep to Nov leg up as well, so its really nothing to fuss about. The Dow has just entered a short term overbought condition and might have to move sideways for a few days more in order to muster some more energy before resuming the leg up to new highs.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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New Leg Up?

Investors took back lost grounds last week, closing the Dow up 2.62% week on week in a week of mixed economic data and easing tensions on the Korean Crisis.

All of last week's economic data turned out extremely positive except for the marginally higher unemployment rate on Friday. Unemployment rate turned out 0.1% (9.8%) higher than consensus of 9.7% much to the surprise of every analyst as employment data by ADP and the dropping trend in jobless claims over the past 4 weeks seems to point towards a better unemployment rate than this. In fact, many analyst think the data could be revised upwards. As such, investors remained optimistic through the disappointing data on Friday, closing Friday marginally higher by 0.17%. This is going to be a quiet week, like all second week of the months, with no important economic releases. This is also what we call a "Digestion Week" for investors to make sense of all the heavyweight economic data of the first week and to decide what to do.

On the technical front, the Dow made an important rebound off the weekly 200MA with room left to upside, tilting the odds to upside for the next leg. Indeed, as I mentioned last week, a decision made last week would certainly result in a significant trend and that is clearly what is happening now. Immediate resistance level would be the November high with immediate support on the daily 30MA.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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Dow Follows Up Strongly...

The Dow followed up on the rebound of Wednesday bolstered by better than expected Pending Home Sales data, closing up 106 points on strong volume.

Fundamentals
Investors followed up weakly on Wednesday's rebound when market opened but things started really taking off when the Pending Home Sales data turned up 10.4% stronger, indicating a strong return into the housing market, which is an important engine to economic growth. The lackluster opening today could be due to jobless claims turning in higher than expected. However, the 4 weeks average for jobless claims, which is what analysts really look at, continues to point towards a declining trend in jobless claims, which is definitely a plus point. Investors are also clearly pricing in an optimistic jobs report for tomorrow and I won't be surprised to see some profit taking even if the report was as optimistic as expected.

Technicals
The Dow gained a total of 356 points in this two days rally and as I mentioned in my newsletter to paid subscribers yesterday, this is truly the time to start taking cautious new long entries in order to ride the next leg up. However, since the Dow has made such a huge move in just two days, I won't be surprised to see a sideways day tomorrow no matter how the jobs report turns out. However, with the Dow so far from being short term overbought, I remain optimistic that we should see a positive week next week as investors digest all the economic data recieved these couple of weeks.

For now, the Dow remains in a short term bull trend, intermediate bull trend within a primary bull trend.
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