Stocks raced to new highs as the bulls bid prices higher on this shortened holiday week. Starting next month, the Fed will be printing $75B each month instead of $85B, which is still very bullish for stocks. Technically, the action continues to be very bullish as the market as the benchmark S&P 500 found support and bounced perfectly off its 50 DMA line in the middle of December. As long as support holds, by definition, the bulls remain in control of this market. As we have mentioned several times this year, we are in a very strong bull market and pullbacks should be bought, not sold. In the short term, the market is clearly extended and due for a another short term shallow pullback. Meanwhile, the intermediate and long term outlook remain very bullish as the major averages and a slew of leading stocks continue to act very well.
MONDAY-WEDNESDAY’S ACTION: Santa Visits Wall Street
Stocks rallied on Monday as investors prepared for a shortened holiday week. Tech stocks, such as Apple (AAPL) and Facebook (FB), led the rally. Consumer confidence jumped to a 5-month high and consumer spending also rose. Over the weekend, Apple and China Mobile (CHL), the largest mobile phone company in the world, announced a deal to start selling iPhones to their subscribers. Other phone carriers have been selling Apple products in China but CHL has the largest base of clients in the world. Separately, Facebook jumped nearly 5% and hit a new record high on the first day trading in the S&P 500.
Stocks closed early on Tuesday and were closed on Wednesday in observance of Christmas. Before Tuesday’s open, durable goods rose 3.5% in November which easily topped estimates. Separately, retail sales, not including online (which is in today’s world is where most people shop), fell by -3.1% between Dec 16 and Dec 22. We find it important to note and bullish for the market and the economy that a slew of housing stocks are beginning to rally. A slew of financials (XLF) broke out in November and now a slew of housing stocks (XHB) are breaking out of multi-month bases. These are two important areas of the market and the fact that they are rallying bodes well for the economy and the market.
THURSDAY & FRIDAY’S ACTION: Stocks Edge Higher After Xmas
Stocks rallied on Thursday as traders returned from the Christmas holiday. According to the latest data, the S&P 500 has rallied nearly 83% on the day after Christmas. Amazon.com said it will refund shipping chargers to customers affected by any late shipments over Xmas. Shares of T-Mobile US (TMUS) rose after Reuters reported that Japan’s SoftBank is in talks to acquire the wireless carrier. Their plan is merge Sprint (S) with TMUS. Elsewhere, Tesla Motors (TSLA) jumped 3% after a China Daily report said the company will launch additional showrooms in China in 2014. Before Thursday’s open, the labor department said weekly jobless claims fell by 42k to 338k. CNBC reported that of the 249 trading days completed in 2013, the DJIA closed at an all-time high 50 times, while the S&P 500 has finished at a record high 44 times which clearly indicates how strong the market is right now. Stocks were quiet on Friday as the market digested the week’s strong action.
MARKET OUTLOOK: BULLS ARE IN CONTROL
As we have been saying all year, the market is very strong in all three time-frames: short, intermediate, and long. The last pullback was shallow in size (%decline) and scope (days/weeks, not months). As always, keep your losses small and never argue with the tape.