Has anyone got a nose bleed yet?
It was an extremely bullish day on Wall Street today. The bulls ere well rested after their Christmas break and came back with sugar plumb fairies dancing in their heads and pushed all the major indexes to new 52-week highs. Nasdaq composite jumped 33.34, or 1.7%, to 2006.48 and closed above 2000 for the first time since January 2002. The Dow Jones Industrial Average climbed 125.33, or 1.2%, to 10450.00, while the S&P 500-stock index rose 13.59, or 1.2%, to 1109.48.
Helping the bullishness was the Help Wanted Index, which rose in November, breaking the stagnation of recent months and posting the first demonstrable increase in the index since midsummer. This along with the recent pattern in jobless claims clearly suggests that the job market has turned. The monthly change in jobs is likely to accelerate to over 200k per month in the coming months and in 2004, the job market should be helped by a powerful combination of cyclical factors and the forthcoming $100 billion in realized tax cuts that will be dealt in the first half of the year.
Continuing on with the economy, economic reports out tomorrow include the weekly chain store sales, which isn't a market mover but many traders will be dissecting this number to see how well retailers are doing with the Christmas season coming to an end.
Then tomorrow at 10:00AM ET we have the release of the December Chicago PMI. The November Chicago PMI came in well above expectations rising to 64.1, a level not seen since February 1995, but December consensus is for a decrease to 62. If this number comes in above 64.1 the market will react very favorably. One way or the other I would not be in a daytrade when this number comes out.
Also at 10:00AM ET is the release of Existing Home Sales for November where the consensus is for it to resume its upward climb to 6.5M after the September retracement to 6.35M.
Finally at 10:00AM ET is the release of The Conference Board Consumer Confidence number with a consensus of 91.8, which to me is asking a lot for last month it took a 10-point surge, the highest reading since September 2002. Once again if this number beats the consensus number it could put a very bullish tone on the day.
Leaving the economic front and moving closer to home, federal investigators have concluded the Holstein infected with mad-cow disease from Washington State was imported into the U.S. from Canada about two years ago. The Canadian Agriculture Department have provided records that indicate the animal was one of a herd of 74 cattle that were shipped from Alberta, Canada, where a case of mad-cow was found in May, into the US in August 2001. As a result, the U.S. has lost approximately 90% of its beef exports as more than a dozen countries stopped buying American beef as insurance against potential infection. Although the US only exports 10% of its beef, there are many Americans who may take a hiatus from beef consumption until this is all cleared up, which could take months.
Although officials earlier said most of the meat went to Washington and Oregon, investigators have now determined that some of the meat from the cow went to Hawaii, Idaho, Montana, Alaska and Guam.
In other Mad-Cow news, Japan has rejected a U.S. request to discuss lifting a ban on American beef. Japan bought more than $1 billion of U.S. beef last year.
Moving on to more global concerns, two U.S. planes were among the first of 45 foreign aircraft carrying aid and workers to assist the stricken people of Bam, Iran where the estimated death toll is more than 25,000 from Friday's 6.6-magnitude earthquake that shook the city and surrounding region in southeast Iran. Some officials have expressed fears that the death toll could rise as high as 40,000. At least 10,000 are believed wounded.
And From the Beat Goes on Column, the scandal surrounding Parmalat, Italy's eighth-largest company, has widened, with prosecutors saying the company's founder, Calisto Tanzi, is under investigation for misappropriating half a billion euros of the company's money over the years. Prosecutors also allege, as the probe was getting under way, Parmalat employees destroyed documents. It is uncanny as to how closely this is starting to play out like the Enron scandal for Parmalat's auditor Grant Thornton has been thrust to center stage as two of its employees are under scrutiny in connection with fraudulent documents related to their audits of a Cayman Islands-based Parmalat unit. And the Beat Goes On - all over the world. Before we move on to the charts there was one bit of noteworthy news. The NYSE suspended trading of shares in Footstar (FTS), which owns the Just for Feet and Footaction chains, and has moved to delist the stock because of uncertainty over the shoe retailer's financial records. The delisting is pending the completion of various procedures, including any appeal by the company. After all the accounting fiascos we have endured over the last few years what could FTS have done to be delisted so unceremoniously. Seems odd doesn't it? On to the charts. First we will take a look at the mighty DOW. At one point today all the 30 DOW stocks were green, a site one does not see too often.
The last time RSI was above the overbought line the DOW took a 19.1% retracement (1st blue circles). Not a big retracement but was good for 480-point move. A 19.1% retracement from current levels (10450) would bring the DOW back to 9860 for a 600-point move. That's tradable and may be all we get. Another thing I have noticed is how well the retracement levels line up. If we get any kind of retracement in the next few months (said with tongue in check) these may be levels to monitor.
I have been bothered by a negative MACD divergence dating back to September but that divergence resolved itself when MACD made a higher high along with price.
According to RSI, SPX is not as overbought at the DOW but more so than the NAZ.
You could also build a case for a bearish wedge but I think it would be a weak case.
I have also been bothered by a negative COMPX MACD divergence since last September when each new high the NAZ would make was met with a lower MACD high. But that may have resolved itself today also when both the MACD and price made equal highs.
The NAZ is not as overbought as the other indexes so it is looking to be the index with the most upside potential.
12-29-2003 High Low Volume DJIA 10450.00+125.33 10450.00 10321.35 1.56 Bln NASDAQ 2006.48 +33.34 2006.48 1976.96 1.39 Bln S&P 100 549.23 + 6.45 549.42 542.50 S&P 500 1109.48 +13.59 1109.48 1095.89 RUS 2000 563.88 + 8.98 563.88 554.90 DJ TRANS 3038.15 +39.82 3038.15 2998.60 0.13 Bln VIX 17.09 - 0.36 17.86 17.11 VXO 16.04 - 0.43 16.99 15.95 VXN 23.73 - 0.28 24.94 23.56 NYSE AMEX NASDAQ Total Volume 1055M 243M 1414M Total UpVol 947M 191M 1095M Total DnVol 103M 28M 274M 52wk Highs 642 144 312 52wk Lows 13 3 4 Advancing Issues 2533 591 2267 Declining Issues 773 286 969 TRIN 0.32 Total CBOE PUT/CALL 0.53 Equity only PUT/CALL 0.38 OEX PUT/CALL 0.90
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