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All Major Indices Holding Above Support Except One

Nasdaq confirms death cross, issues sell signal


Stocks initially traded higher on Wednesday, but reports of poor holiday sales took a toll mid-morning. And just before noon, the Dow industrials were off 62 points, led by strong selling in retail stocks. The remainder of the day was spent trying to make up for the losses, but selling in the last hour resulting from negative comments on the fiscal cliff from both parties in Congress led to a loss for the major indices.

At the close, the Dow Jones Industrial Average was off 24 points at 13,115, the S&P 500 fell 7 points to 1,420, and the Nasdaq fell 22 points to 2,990. The NYSE traded 475 million shares and the Nasdaq crossed 235 million. Decliners outpaced advancers on the Big Board and Nasdaq by 1.8-to-1.

VIX Chart
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The CBOE Volatility Index (VIX) closed Wednesday at a five-month high. This is normal for a Christmas week with many traders on vacation and volume very low. The additional factors of poor retail sales and the looming fiscal cliff will add more uncertainty and probably more volatility in the next three market days.

XRT Chart
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A report from MasterCard Advisers Spending Plus showed a sales increase of just 0.7% during this year’s holiday period versus last year. Analysts had expected an increase of 4%. Since retail sales are responsible for most of the growth in GDP, this is considered to be unfavorable news for the economy.

Nasdaq Chart
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Despite the looming fiscal cliff and lousy retail sales, the major indices are holding above major support lines, that is, except the Nasdaq, which confirmed a death cross as its 50-day moving average accelerated down and MACD issued a sell signal.

Conclusion: The stock market has acted remarkably strong in the face of bad news and uncertainty. Uncertainty is usually a huge negative for stocks, and so near term we may continue to see weakness and an increase in volatility. However, a meaningful rally could greet the new year if the politicians can just manage to come up with some positive news in the next three days.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

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