For nearly two weeks the Nasdaq held up the broader market as it posted strong gains and broke out of its bearish formation. Now the Nasdaq is taking a break and the S&P is leading the way higher on the strength of year-end retirement cash flowing into index funds.

This is not going to be a real update tonight because nothing has really changed. The markets are trading sideways with a minor upside bias as we wait for the non-farm payrolls on Friday.

The Dow came back from a decent drop at the open to close ever so slightly at a new high. The S&P is accelerating although it only gained +4 today it was positive and moving higher almost all day. This is the power of the retirement money flowing into index funds.

A bit more positive to the upside bias was the new high close on the Russell. Like the Dow it was just barely a new close but considering the volatility and indecision this week that is a bullish sign.

I am not going into a long discussion here because it all depends on the payroll numbers on Friday. Jobless claims were weaker than expected but there have been some weaker payroll indicators in other reports over the last two weeks. I don't know what it will take to push the markets higher but I would have to say there is an extreme possibility of a sell the news event regardless of the news. The market is very overbought and looking for an excuse to take profits.

I am raising the stop on the DIA short call to 107.05, as well as the long put. Hopefully we won't have a gap and crap on the jobs numbers that stops us out then drops for several hundred points over the next week.

We were triggered on CRR and LUFK this morning and there are no outstanding recommendations. Now all we need is for the market to cooperate. A nice 300-400 point decline would be just fine and then we could start writing some OTM puts in anticipation of a rebound.

Jim Brown

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