The truth is, when calling for an overall market direction, technical analysis alone is just not enough. This market has been volatile and it's been difficult calling a one way action for both the bulls and bears. We have definitely been in a zigzagging mode during the past few weeks. Since the late November rally, you can say we've been stuck in a pretty big trading range with some wild swings both ways. Fortunately, we think we may be near a point where we can finally get some meaningful action going. At this point we are getting what we wanted last week despite the market looking technically troubled at that stage.... .."...the only reasons not to abandon the market is the fact(s), we are waiting for earnings, hopefully to spark the market, the seasonal factor to move the market up and the fact volume is low on this sell off, which also allows for opportunity for a sizeable swing(s) to the upside on the same low volume. Let's add one more and that is the proverbial bounce possibility now. Santa has enough things in his sleigh to run over the Bears still, but he needs help from companies announcing earnings this week first."....... We are not being the overly optimistic bulls as caution is still needed. We are simply going to be watching events, especially earnings closely that may shape up the trading action for the next little while. Friday's option expiration pop may seem a little suspicious, but it can also be said that we could've very well gone the other way not really knowing the expectation the day before. Fact is, the market rose in a very healthy percentage and now we have to deal with what the possible scenario that may lie ahead of us.
In our opinion, the market is ready to cheer for some good news. We now know what this market is capable of when good news is put in front of it. Basically there was couple of key events, an earning report from RIMM, a back to back with ORCL, and news of possible foreign cash infusion into MER. Big techs had strong positive reaction and financials also traded well. We have been saying this for a while that in order for this market to gain any upside momentum, we need companies to deliver earnings that show no slowdown in growth and no signs of recession. Also, financials need to go up on headlines, good or bad ones, or at least stay steady on the bad stuff. MS/ BSC trading firmed up despite the expected blow ups during the week.
The coming week is a short trading week and we have just 3 1/2 trading days to deal with. While we can assume that many traders have taken the week off to spend time with the families, we believe some traders may be taking advantage of the light volume holiday week to push some stocks around. We are looking at none other than the solar sector and any other stocks made the recent headline in a good way. The ones that have made the recent 52 week high are also high on our trading list.
A rundown here with solar stocks that include STP FSLR JASO SOLF CSIQ, popular stocks include AAPL RIMM MA, Russian stocks like MBT WBD VIP, and recent additions include RSTI LRN APEI are all on our top trading list.
We definitely had a pretty turbulent year but we can still end the year on a high note. Stay with the best performing plays because those may be the ones to get us off to a good start in the new year.
As we said above technical analysis is not enough, but with the DJIA and NASD closing at 13450 and 2691 respectively, we are getting more comfortable with the market. Last week in weekend charts, we noted"..The DJIA /NASD are below our comfort levels of 13500 and 2700 respectively, but since volume is expected to whittle down in the coming days... anything is possible. This includes big upside days that can easily get us to the levels noted and away from 13300....". Anything was possible as Santa seems to have gased up and we should move over the above levels into the New Year. Another possible positive technical scenario and a possible Bear stinger is the action in the small cap RUT, IWM as the down trendline from September might be busted shortly. The Bears might have a lack of blueberries to fuel on if we cross here. We are possibly entering the seasonal small cap outperformance of large caps into the month of January, this is probably coinciding perfectly with a break to be over the trendline noted.
A Merry Christmas to our DJIM friends and your families!