The Christmas Eve session may have recorded the lowest volume of the year, but buyers were abundant enough to drive the major indices to new closing highs. The euphoria that brought on the buying that resulted in nine of the S&P’s 10 sectors gaining apparently came from a drop in weekly jobless claims.

The consensus estimate for jobless claims was 470,000, but only 450,000 were reported. This is the lowest level of claims since the fall of 2008. In addition, durable goods orders rose 2% versus an estimate of 1.1%.

The only major sector to close lower was health care following the passing of new health care legislation by the Senate. The sector had rallied earlier in the month, and analysts feel that the legislation is already built into the price of most of the stocks.

The leading groups on Thursday were the materials and technology sectors. Small- and mid-cap stocks were higher and have led the rally since Friday, Dec. 18.

The U.S. dollar fell against the euro and the yen.

On Thursday, the Dow Jones Industrial Average (DJI) rose 54 points to 10,520, the S&P 500 (SPX) gained 6 points to 1,126, and the Nasdaq (NASD) gained 16 points to 2,286. Each of the major indices closed at a new high for the year.

The NYSE traded 319 million shares and the Nasdaq crossed 179 million shares. Both traded the lowest volume of the year, and advancers led decliners by about 3-to-1 on both exchanges.

February crude oil rose $1.38 to $78.05 a barrel due to gains in stocks and a weaker dollar. The Energy Select Sector SPDR (XLE) gained 27 cents, closing at $57.81.

Gold for December delivery also rose on the weaker dollar, up $10.80 to $1,104.10 an ounce. The PHLX Gold/Silver Sector Index (XAU) closed at $172.01, up 64 cents.

What the Markets Are Saying

With each of the major indices hitting new highs and the S&P 500 exceeding our 2009 target by closing at 1,120.59, the path is very definite: up. But the real percentage winners are the small- and mid-cap stocks, and they too blasted to new intraday and closing highs.

The technology-heavy Nasdaq again led the other indices on Thursday, as it has led them in percentage gains since its dramatic triple-top breakout last Dec. 21.  Since then, the Nasdaq gained more than 3.3% in the shortened holiday week. And with the breakout, it seems possible that the Nasdaq could even reach our intermediate bull market target of 2,300 before the end of this year.

With the new high for the S&P 500, the tightly coiled spring in which the index has been trading since mid-November finally released. And with that release of the tight compression of the trading pattern, the “500” could experience a very quick rally with the next target its intermediate bull market objective of 1,245.

The Dow also broke through the resistance at 10,500 last week, and now has little overhead resistance before 10,800 or so. The next target for the Dow is its intermediate bull market objective of 11,265.

Hurrah for the chubby, old fella in the red suit. He came through just as always on Christmas Eve.

Today’s Trading Landscape

Earnings to be reported before the opening: Northwest Pipe Co. (NWPX).

Economic reports due: Fed balance sheet and money supply.

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