The major stock indexes traded back and forth the unchanged level today, with very modest gains going into the close run on very low volume.
Officially, the Dow Industrials rose 0.3% on NYSE volume of 3.1 billion shares, while the NASDAQ advanced 0.2% on 1.2 billion. The leadership profile remains positive, with 733 stocks making new highs versus 93 making new lows.
The short term momentum oscillators remain positive, confirming the bullish stance of the AlphaKing Trading Indicator for the NASDAQ. We have new trades below.
End of year positive bias continues to create some modest short covering among the bears, though some key indexes - such as the Dow Industrials and UK FTSE - continue to struggle just beneath breakout levels. This game of chicken with the bears, as the new year beckons while the indexes remain overextended and in need of a correction, is the name of the game going forward.
Can the bulls force a larger short covering rally, or will the new year start with a corrective bang once traders return from the holidays? The short answer is that both are very possible, so caution must be taken by both camps, as one is surely going to get their financial heads handed to them. Our goal is follow the trends, and job one in that regards is to buy into this rally over the next week or so while remaining wary of the dangers of a whipsaw as the turn once the current blow-off ends will be very swift. Thus look for more new buys going forward, though hedged with a healthy dose of cash.
401K investors should be invested in a money market fund, though we may have a new trade this week as we look for a favorable entry point.
Kevin Wilde, Chief Trading Strategist AlphaKing.com.
