Tuesday, December 23, 2014

NASDAQ poised to take a shot at a new near-term peak

The Santa Claus rally or V-shaped recovery continues. NASDAQ is now just 10 points below its pre-Thanksgiving near-term peak and less than 20 points below the psychological 4800 level. We could easily hurdle those milestones, especially with the low volume of holiday-week trading. But... will it stick, especially when all the heavy hitters get back from their holiday breaks in he first week of January?

The big question is whether NASDAQ will simply top out in the trading range here and reverse to trade back down in that range, or whether it has enough gas to at least kick off a new leg above the pre-Thanksgiving near-term peak. I lean towards the latter, but whether any of that can stick through the first week of January is another matter.

The U.S. economy is still hanging in there, continuing to incrementally strengthen, albeit at too uneven and sluggish pace to appeal to the ADHD-afflicted short-term speculators of Wall Street. Ultimately it is this strengthening U.S. economy, which will lead most of the rest of the world, which will underpin the advance of the stock market.

NASDAQ futures are up moderately, due to a nice 5% handle on revised Q2 GDP, indicating another pop at the open. It's always possible that trading will reverse from the opening move as the day progresses, but its probably a little less likely on low-volume holiday slow-trading weeks such as the one we are in.

Note that durable goods orders are extremely volatile month to month, so a down report like we just received for November is not so likely to indicate a trend. That's why the wiser economists always remind people that the latest data point in a data series does not indicate a trend.

Trading could also be a bit atypical today since it is the last full trading day before Christmas since Wednesday is a half-day of trading, Friday is a full trading day (unlike the day after Thanksgiving), but it too will be quite atypical due to the holidays and vacations.

Oil (OIL) is hanging in there with a trading range, hovering around $55, with market participants struggling to decide whether $50 or $60 is the next stop. I'm prepared to buy $50 oil, but to me it feels that $60 is a more likely next stop, although the timing is... inscrutable.

-- Jack Krupansky

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