Stocks Continue Upside
- Another upside though rather nondescript advance continues the recovery.
- Jobless claims continue to improve, hitting the lowest reading since April 2008
- Michigan Sentiment marks fourth straight gain on the final read.
- LEI down but tops expectations.
- Q3 GDP revision misses expectations.
- Payroll firms indicate small businesses still slow.
- Santa rally is producing the advance and it is nice, but keep a dose of reality.
Stocks continue upside though the move is not scaring the shorts.
Stocks were able to move higher once again. They started higher and actually finished higher on the session. Futures were up on some decent U.S. economic data. The good outweighed the bad, and stocks were trading higher premarket. When the market opened, there was some dipping, but they held the gains and steadily advanced through the rest of the session. It was not necessarily a runaway in the afternoon; it was more of a lateral move starting at lunch with a bit of a bleed higher into the close. That is nice to see because of late we have been either running higher or lower at the close. This was a more “normal” session (for lack of a better word) in that we did not see the ETFs running prices higher or shoving them back down. In the end, there were decent gains.
SP500, +0.83%; NASDAQ, +0.83%; Dow, +0.51%; SP600, +0.65%; SOX, +3.49%.
It always helps when the semiconductors decide to make a move and join in the action, and that is exactly what they did. Of course that helped out the market overall.
It was good to see stocks post a move wire-to-wire, so to speak. They opened higher, tested, but did not give anything up of significance. They finished the day to the upside without necessarily streaking higher on some fund manipulation. Overall, the gains were rather nondescript. SP500 continued the move out of its eurozone that it broke into, but it is looking better and heading to the upside. The DJ30 continued its move higher as well. Of course it still has serious work to do. The Dow as well as SP600 will be bumping against the October peak. They have to deal with harsh reality even though they are leaders out in front of the rest of the market.
It is always tough to come back from these selloffs because you have to break back through all of the overhead resistance that has formed. There have been good gains. A huge surge on Tuesday, but then the last couple of days have been so-so at best. You always see this. The market will be fighting to the upside, and then it can all get swept away relatively quickly. But the market continues to make higher lows and now it is putting in higher highs. That is always a positive. But we can expect volatility to continue because the problems that confront the market will continue (Europe and problems with U.S. stocks and earnings).
There were going to be more problems out of Europe on Wednesday. That facility that was announced on Wednesday seems to have had a positive effect on Thursday on the analysts looking at the situation. The markets were able to brush off any negatives and advance. I am not saying it will be clear sailing. We are in a Santa Claus rally, and there will still be volatility. I do not care whether the news is great or mediocre. There will be volatility because we have that European issue hanging out there. On any given day, relatively negative news can hit. We may continue with the two steps forward and one (or one and a half) steps backward, but for now it is producing higher highs and higher lows. That is a positive. We will get the real test for the higher highs very shortly on some of the NYSE indices.
FRIDAY
The eve of Christmas Eve is upon us. We will have some more economic data with Durable Goods Orders for November. Personal Income and Spending will be out before the opening. Then we will have New Home Sales at 10:00 o’clock. That is always important because New Home Sales is where all the ripple effect comes from with the furniture, carpet, and everything that has to go into a new home.
We have seen materials prices moving higher. Materials stocks are moving higher. Is it just inflation or is there something really happening out there? Let’s face it, there is some decent news regarding the U.S. economy. It is not going gangbusters as the 1.8% GDP shows, but there is improvement. We will take it. I would like to have better, and there should be better. Better policies in the economy and less regulation. With that we would have a better economy right now. We want to move up.
This is not an affirmation of the current administration’s policies; the U.S. economy is moving higher IN SPITE OF the current administration’s policies. Anyone who does not believe that can look at all of the past recoveries where we had horrific recessions. Most of the 70′s and early 80′s were terrible. Then we got the right kind of policies that blasted us out of it and put us on a 20-year economic boom. If only we could get some of those policies adopted right now. Who knows where we would be at this point. Needless to say, we are not there.
We are looking at a rally. It is nothing great. It takes as many steps back as it does forward at times, or so it seems. It is putting in higher lows, however, and in some instances (as on the SP600), putting in a higher high. Those are very important. You cannot ignore that. You also cannot ignore that it is a volatile move up and down, and it will continue. The same problems are there.
Europe will be there every day. It is about whether some good news or bad news comes out. Then we see if that can be offset by positive U.S. news. We have volatility and we have Europe. We have U.S. companies warning and we have low volume. You can see that this can cause upset for the gains. How many times have you seen the market fight higher, scratch and claw, only to get washed away by some bad news? It has happened before and it can happen again.
We do have improvement. The economic data is stepping up and looking better. Many stocks are in good patterns and are just moving higher. When you have good stocks in good patterns, that shows people are accumulating them and putting in money. When they start to break higher, it shows that demand for that stock outstrips the supply, and then it moves to the upside. That is what bumps the market higher.
We expect to see this rally continue through the end of the year and likely into the first of the year. After that I do not expect much more. Anything else will be a bonus. We can expect continued volatility and back-and-forth trade even if the advance continues. That is the hand we are dealt given all the external influences impacting the market. We are looking for this end of the year move to continue, and perhaps toward the end of January, as the economic data continues to improve. But do expect volatility and some setbacks. We will continue to play the good patterns that continue to set up and deliver upside moves. Those will help lead the market and give the biggest pop because they are not extended. We want to take advantage of those and play them upside in this move.
At the same time, we are still playing some downside because some stocks are just broken. We will take advantage of that and make money off those. Overall when we see these good upside patterns in a market that looks like it is trying to improve. There are the higher lows and even some higher highs — and there may be more , dare I say it. We want to play that upside, but we have to understand that it is going to be choppy. We will get thrown back. We will have setbacks and some despair. We will have to deal with that. We have to understand that that is the market we have. Just take a deep breath, hold your nose, and play it. When we get toward the end of January or when it runs into serious resistance and falls and shows a reversal indication, we can get out and then see what 2012 brings. But that is a different story.
Stock Splits & IH Alerts, Editor
InvestmentHouse.com
