Stocks were mixed for the second day. But banks were strong on rumors that the government is planning a stimulus program to help the financial industry with a new refinance program. The story was later denied by the White House, but the rumors persist that a program to address the foreclosure problem is being considered.
Steady pressure on the euro, which resulted from a continued transfer of funds to the European Central Bank, boosted the U.S. dollar. But despite the negative impact that a strong dollar put on U.S. stocks, one key index broke out confirming that the intermediate uptrend is “the real deal.”
At the close, the Dow Jones Industrial Average fell 3 points to 12,416, the S&P 500 gained 4 points to 1,281, and the Nasdaq rose 22 points to 2,670. Volume on the NYSE totaled 828 million shares, and the Nasdaq traded 470 million. Advancers led decliners on both exchanges by 1.5-to-1.
The major indices opened weak yesterday, threatening the new upward direction in stocks. But even though the Dow industrials fell over 130 points in the first 30 minutes, by the close almost all of the losses had been erased.
And our prime concern, the Nasdaq, jumped 0.81%, blowing through its bearish resistance line and its 200-day moving average. This confirms the change in intermediate trends by the Dow industrials and transports and the turn higher by the S&P 500.
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The unusual strength of U.S. stocks in the face of new lows for the euro and a blast higher by the dollar were lost to the writers of The Wall Street Journal, whose headline “Dow’s Drop Is First In New Year” missed the big story.
While the Dow fell by a measly 3 points, the Nasdaq forged ahead against the traditional contra-trend expected from a stronger dollar. Just two months ago, the euro’s weakness would no doubt have cost the Dow industrials 200 points rather than just 3, and the only change in trend would have been down rather than up.
It was a remarkable performance byU.S.stocks that is no doubt caused by a basic change in both the technical situation and fundamentals. On the fundamental side, railcar loadings hit new all-time highs recently, credit card delinquencies have plunged to record lows, the regional purchasing managers’ index is stronger, pending home sales are improving, real retail sales are on track for a 7% hike, job surveys are better, and unemployment claims are falling.
Will there be pullbacks and tests following the breakout? No doubt. And some will likely result from further European missteps. But for now, the intermediate trend is up and traders would be wise to use any weakness as a buying opportunity.
And if you’re looking for help making profitable trades in the new year, my colleague Joe Burns just closed a Baidu.com (NASDAQ:BIDU) trade for a 158% profit, a First Solar (NASDAQ:FSLR) trade for 143.75%, and a Google (NASDAQ:GOOG) trade for 80%. Get in on his new trades now.
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.
