Despite another day of very low volume, on Friday there was enough economic news to move stocks higher. The Commerce Department announced that retail sales in November rose 1.3%, which had some impact on the retail group. And the University of Michigan/Reuters preliminary consumer sentiment index for December came in above expectations.

Consumer stocks benefitted most from the economic reports, and Dow component Home Depot (HD) rose 1.8%. The S&P 500 (SPX) gained 0.37%, mostly on buying in consumer discretionary stocks.

The U.S. dollar was a beneficiary of the reports, as well, surging against a basket of other currencies. The dollar rally sent the euro to its lowest level in two months, dropping it briefly to under $1.46. 

Commodities and producers were sharply lower, hurt by the rising dollar. And technology stocks were also lower. Cisco (CSCO) fell 0.7%, Intel (INTC) was off 1.2%, and National Semiconductor (NSM) fell 3.6% despite an increased quarterly profit that beat analysts’ estimates. The tech-heavy Nasdaq (NASD) fell 0.03%.

At the close, the Dow Jones Industrial Average (DJI) was up 66 points to 10,472, the S&P 500 rose 4 points to 1,106, and the Nasdaq fell a point to 2,190. 

The NYSE traded just over a billion shares with advancers ahead of decliners by about 2-to-1. On the Nasdaq, 511 million shares traded, but advancers were only slightly ahead.

For the week, the Dow gained 0.8%, the S&P 500 was unchanged, and the Nasdaq fell 0.2%.

On Friday, crude oil for January delivery closed 67 cents lower at $69.87 a barrel, and the Energy Select Sector SPDR (XLE) rose 3 cents to $55.53. 

Gold (December contract) fell to a four-week low at $1,110.80 before the final fix at $1,119.40 an ounce, down $6.30. The PHLX Gold/Silver Sector Index (XAU) closed at $172.44, down $3.70, and below its 50-day moving average for the second time in a week. Support for the XAU is now at the bullish support line at $160.

What the Markets Are Saying

The indices are still bouncing around between Dow 10,230 and 10,450, and S&P 1,085 and 1,115, with little to indicate a change before year-end. Therefore, let’s take a moment to review the overall market situation.

>

After one of the most destructive panics and resulting bear markets in history, the stock market finally exhausted itself and turned bullish in July. That turn was authenticated by one of the most reliable of reversal formations — a massive reverse head-and-shoulders breakout.

And the July breakout from that powerful reversal had some lofty targets. On July 23, in the midst of the buying, I predicted that, “The S&P closed at a new high for the year and now appears to be embarking on a new leg with a near-term target of 1,000, as well as a longer-term target of 1,200, which could be achieved before the end of the year.” 

I later refined that to a short-term target of 1,120 before year-end and a longer-term objective of 1,245. On Dec. 4, the short-term target was effectively met when the index hit 1,119.13.

S&P’s Mark Arbeter says that major bullish signals, like the July breakout and subsequent confirming signals usually “set the stage for a typical four-year (give or take a year) bull market.” I believe that Mark is correct in that bull markets usually last from three to four years, and bear markets usually last around 18 months. 

Now the long-term and intermediate-term trends for all of the major indices are up. It is just the short term that is questionable. 

But the charts that I review daily are showing a buildup of on-balance accumulation despite the stiff resistance at around S&P 1,120. And the internal indicators, chiefly the short and long stochastic, momentum, and Relative Strength Index (RSI), flashed buy signals late last week. Therefore I believe the markets are now on the verge of breaking to the upside, and that the breakout could happen before the end of the year and perhaps even this week.

Investors may be taking a risk by anticipating the breakout, a practice that I normally don’t recommend. But the current narrow trading range is coming under intense pressure from the bulls, so while longer-term investors may wait for the confirming break, traders will most likely want to make a move now.

Today’s Trading Landscape

Earnings to be reported after the close include Steak ‘n Shake (SNS) and VeriFone (PAY).

There are no significant economic reports due.  

5 Surprising Rules for Rebuilding Your Wealth
Investors sitting on big losses are being told to just hunker down and take their lumps … and if they can just be patient and wait another 12 or 24 months, their investments will come back. That’s shameful advice! Once you know the new rules of trading, you’ll see how easy it is to earn double- and triple-digit profits now. Click here to start rebuilding your wealth today.