On the penultimate session of the year, stocks rallied due to better economic data. Despite the low holiday volume, the U.S. market’s response to the news encouraged the European markets to rally as well.
But early in the session the euro hit a new low of $1.2858 then reversed in the afternoon to close at $1.2959 for a slight gain. The Wall Street Journal reported that Citibank (NYSE:C) predicts that the euro will fall to $1.20 next year, and speculators hold a net short position of $18 billion, the highest in four years according to the CFTC.
Initial jobless claims were reported to be up by 381,000, which was higher than economists’ estimates of an increase of 368,000, but the number appeared to have little impact on trading. Strong pending home sales showed an increase of 7.3% versus an expected increase of 0.6%, and that number did have a positive impact on the markets. And the Chicago PMI for December came in at 62.5 versus expectations of 60.1.
At the close the Dow Jones Industrial Average was up 135 points to 12,287, the S&P 500 gained 13 points at 1,263, and the Nasdaq gained 24 points at 2,614. The NYSE traded just 531 million shares and the Nasdaq traded 270 million. Advancers led decliners on the Big Board by 4-to-1 and by 2.6-to-1 on the Nasdaq.
Despite a higher close yesterday, there is no change to the technical position of the key indices. In order to move forward each must attack the immediate and substantial overhead.
The S&P 500 managed for the third time in four sessions to close above its 200-day moving average and its descending resistance line drawn from the June/July highs. But it must close above the highs at 1,269, 1,267 and 1,293 before the technical picture turns positive.
On Dec.28, 2010, I provided projections for 2011. The immediate target for the Dow industrials was the June 2008 breakdown at 11,785. That equated to 8,365 for the NYSE Composite and 2,700 to 2,710 for the Nasdaq. However, I went on to explain that as long as the S&P 500 held above 1,227 the “overall target for the S&P 500 for 2011 is 1,400; for the Dow it is 12,800; and for Nasdaq it is 3,700.”
Unfortunately, the term “European contagion” wasn’t considered, and when the 1,227 line was breached in July our overall targets were negated. However, despite the mess across the pond, our targets weren’t too far off. The high for the S&P 500 was 1,370.58 versus 1,400; the Dow made it to 12,948.35 exceeding my target of 12,800; and, the overachieving Nasdaq made it to 2,887.75 versus my target of 3,700.
As for our stock picks, some worked and others didn’t. Taking the recommendations from the monthly “Top Stocks too Buy/Sell,” here are some of the best and worst.
The worst, by far, was January’s Suntech Power (NYSE:STP), then at $8 and now at $2.12. And then Stryker (NYSE:SYK) at $63 on March 1, now at $49.59.
But there were winners too. In February, UnitedHealth Group (NYSE:UNH) at $41.29, now $50.71. Yamana Gold (NYSE:AUY) in June ran quickly from $12.79 to $17.44. And Dollar Tree (NASDAQ:DLTR) in August at $66.80 is now at $83.90. More recently, Perrigo (NASDAQ:PRGO) was recommended in November at $87.97, closing yesterday at $98.90.
But our real winners were sales and short sales. Qiagen (NASDAQ:QGEN) in February at $18.58, now $13.75. JetBlue Airways (NASDAQ:JBLU) at $6.32 in April that went to $3.40 and is now at $5.16, Netflix (NASDAQ:NFLX) in September a short at $234.53 now at $69.30, and Transocean (NYSE:RIG) at $56.28 now at $38.63.
And speaking of profitable trades, 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.
I obviously haven’t mentioned them all, especially the losses, but I’m honored that you have followed my attempts to provide profitable trades.
Next week, I’ll present the index targets for 2012. Have a very happy and prosperous new year.
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.
