Stock Market Analysis

Tuesday, December 11, 2012

Santa Claus Rally Continues...

The Dow posted its 5th straight up day today despite mixed economic data.

Santa claus rally seems to be at its fully swing now as US market continues to power upwards despite largely mixed economic data. Sales data were mixed and trade gap widened. Definitely nothing to cheer about. However, that's what rallies, or multiples expansions, are all about. Rallies such as the Santa Claus rally ride on many sentimental and technical reasons that go beyond fundamentals. This is why such anomalies are consistent in most years regardless of economic data. Options traders kept total equities put call ratio below 0.9 in favor of call options trading and bond yields steepened as investors make more short term reallocation back into equities. Both indicators support today's move with no contradiction. The Feds will make their announcement tomorrow. Even though nothing new is to be expected, the market still is expected to trade cautiously in the morning prior to the release.

The market is once again threading in short term overbought territory and could use a little ease back before anymore upside is possible. Expect some short term profit taking over the next few days.

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


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