On the last trading day before Christmas, stocks continued their recent trend of flat to positive opens that eventually lead to a consistent downtrend until the close. For the fifth day in a row on the Nasdaq and for the fourth out of five days on the SP 500, stocks fell on lower volume. The pullback, today, was blamed on the durable good numbers minus transports falling 1.1%. Talk about cherry-picking your data. Sheesh.
At the close, the DJIA and the Nasdaq fell .6%, the SP 500 fell .5%, and the SP 600 fell .4%. The good news is small caps did not lead to the downside this time. The bad news is leading stocks, measured by the IBD 85-85 index led to the downside with a .8% loss.
The wonderful Christmas holiday news was that volume came in well below yesterday's levels and was well under the 50 day volume average. This is just what you want to see on a pullback. Volume keeps coming in lower every day the averages pullback. PREFECT!
Breadth was negative on the NYSE by a 5-to-3 margin and negative on the Nasdaq by an 8-to-7 margin
Oil stocks were among the worst of the session. The Amex Oil Index fell 1.2%, and the Philadelphia Oil Service Sector Index eased 0.6%. The Nasdaq Telecom Index slipped 1.3%.
For the week, the Nasdaq led to the downside with a 2.3% loss, the SP 600 fell 1.5%, the SP 500 dropped 1.1%, and the DJIA managed only a .8% loss. Overall, it was a bad weak, just by looking at the numbers. However, when volume is included, it was the perfect pullback. It is very nice to see this selling come on very low volume. It would be MUCH worse if volume was rising. But it isn't.
The Nasdaq is now at its 50 dma, joining the SP 600 at this critical line. It will be important to see how the indexes shape up here in the coming weeks. Strong selling through this line will be bearish. However, if the indexes either drift around here on low volume or blast off the lines on strong volume, it will be bullish for the markets.
The Nasdaq currently is at the bottom of its trading range and has not broken down so jumping to the bear side is not a smart decision yet. The longer-term trend is still up on both the Nasdaq and SP 600 so the smart play is to remain focused on the long side. Until the trend changes, you have no reason to.
It is going to be a light volume week ahead. There will be many small stocks that should produce some nice gains in this kind of trading environment. At the same time, during this time, if you have any stocks that selloff on heavy volume you might want to consider getting rid of them. A lot of small caps run a ton during this kind of trading. However, if you are long a bunch of junk and they don't move and instead go down, you should get rid of them.
Hopefully, the market will keep pulling back all next week. That would create a beautiful basing pattern for a possible upside breakout for the indexes. Low volume pullbacks are about as good as it gets after such a strong run up as we have had in the indexes.
Even though it doesn't seem like the Christmas spirit is in the air on Wall Street, it is to me. I love low volume pullbacks during the holidays. More often than not, a low volume rally over the holiday periods leads to selling. Low volume pullbacks then lead to higher volume rallies. This is my perfect Christmas scenario right now. This is what I wanted and this is what I am getting, so far.
The big money will not be playing this week, so expect little changes in the markets.
Aloha, Mele Kalikimaka and Hau'oli Makahiki Hou!
I will see you at Investors Paradise.
New Swing Longs: NONE
Adding To Longs: NONE
New Swing Shorts: NONE
**number is % gain since long taken. Only stocks up 25% have numbers**
Longs Up On The Day (low vol non-IBD excluded): PTT-109 AOB-99 STEC-82 MA-94 FFH-27 PCCC-35 APLX-29 PSPT-32 TTEC-62 JSDA BLUD INAP MAIL HEI CCO FMCN EVEP IMKTA IFOX IWOV AMOT CTCM DECK GIFI PCC SKX NHWK VEH AB CVLT AMSF CACB IMA DLB WTS IPHS IMMU TZIX SEAC HAUP AFT
Stocks On Radar Screen: ATNI EMCI MOCO CALM TAST ITMN ISPH DAR PRKR TLEO STKR IDN SAB
The Important Partial Profits/Losses: RTSX ONT HOTJ SRSL
Completely Take All Profits/Losses: GSL TDY
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