Health care and mining stocks led the market to an early gain yesterday. But after an explosion of buying, the markets went flat and traded in a narrow band for the remainder of the day. Part of the early buying stemmed from a weaker U.S. dollar, analysts’ upgrades, acquisitions and the advancing of the health care bill by the Senate.

But stocks held their own despite a rally in the U.S. dollar, which turned the Dollar Index from an early loss to a gain of 0.4% on the close. Even though the gain had a negative impact on commodities, stocks were virtually unaffected. 

Bucyrus International (BUCY) rose 9.8% after announcing the purchase of the mining unit of Terex (TEX), which jumped 9%, and Potash Corp. (POT) rose 3.5% after an upgrade by Goldman Sachs (GS).

By the close, group rotation had focused on the financials, and they turned out to be the leading group of the day, up 1.5%. Much of the gain in bank stocks was attributed to a favorable Barron’s article.

At the close, the Dow Jones Industrial Average (DJI) was up 85 points to 10,414, the S&P 500 (SPX) gained 12 points to close at 1,114, and the Nasdaq (NASD) rose 26 points to 2,238. 

The NYSE traded just over 1 billion shares with advancers topping decliners by 9-to-4. The Nasdaq traded 514 million shares with advancers ahead by 2-to-1.

Crude oil (January contract) fell 89 cents to $72.47 a barrel due to a stronger dollar, and the Energy Select Sector SPDR (XLE) rose 67 cents, closing at $56.82.  

February gold fell $15.50 to $1,096, also on the stronger dollar, and the PHLX Gold/Silver Sector Index (XAU) dropped $1.61 to $165.43.

What the Markets Are Saying

Despite a dramatic breakout yesterday by S&P SmallCap 600 Index (SML) and the S&P MidCap 400 Index (MID), the major indices have yet to follow through with their version of a major signal that could result in a broad market advance.

But maybe all of that changed yesterday when the Nasdaq, the major speculative index, also broke to a new annual high, and did it with a splendid breakaway gap. This is the type of break that technicians look for to signal that something significant has happened.

A breakaway following an extended period of pounding against overhead resistance usually says that the sellers have not only been overcome, but overwhelmed by a huge accumulation of buyers versus sellers. 

So the Nasdaq, which includes the broad technology and financial sectors, has finally given the long-awaited buy signal. And that signal, along with the break of less volatile and more long-term investment oriented indices, like the Dow Jones Transportation Average (DJT) and Dow Jones Utility Average (DJU), in the face of a stronger dollar is telling us that the Dow Jones Industrial Average and the S&P 500 will also punch through their overhead and confirm that a new broad-based stock market advance is under way.

Buy now and avoid the New Year rush.

Today’s Trading Landscape

Earnings to be reported before the opening: Commercial Metals Co. (CMC), Lindsay Corp. (LNN) and Progress Software (PRGS).

Earnings to be reported after the close: Cintas (CTAS), Finish Line (FINL), Micron Technology (MU), Red Hat (RHT) and TIBCO Software (TIBX).

Economic reports due: ICSC-Goldman Sachs store sales, GDP (the consensus expects 2.7%), corporate profits, Redbook, existing home sales (the consensus expects 6.25 million) and FHFA House Price Index.

Late news: Moody’s downgrades Greece’s debt rating, according to the Wall Street Journal.  

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