Stocks Rally On Lighter Volume

Tuesday, December 22, 2009

Market Commentary:

Stocks in the US closed higher after the latest round of economic data was released. Volume, an important indicator of institutional sponsorship, was lower than Monday’s levels. Advancers led decliners by nearly a 2-to-1 ratio on the NYSE and by a 16-to-11 ratio on the Nasdaq exchange. There were 52 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, higher from the total of 43 issues that appeared on the prior session. New 52-week highs solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Economic Data:

Before Tuesday’s opening bell, the Commerce Department said third quarter GDP rose by +2.2% which was lower than prior estimates and led many to question the health of the ongoing recovery. The report showed that companies curbed spending and cut inventories due to lackluster demand. At 10:00 AM EST, the National Association of Realtors said existing home sales jumped +7.4%  to a 6.54 million annual rate. The report was the highest in more than two years and led many to question whether or not the ailing housing market has finally bottomed.

USD vs. Dollar Denominated Assets

Continuing the recent trend, stocks and the USD both advanced today. However, other dollar denominated assets (i.e. many commodities) edged lower. Investors are still not sure if this is the beginning of a new trend: stocks are now decoupled from the USD or if this is a brief anomaly which will pass after the new year?

Price & Volume Action:

According to Bloomberg.com, the Street expects 2010 earnings to grow +24% which follows a -12% decline in 2009 for the average company in the S&P 500. The survey also showed that first quarter earnings are expected to grow +28% when compared to the same period in 2009. The Dow Jones Industrial Average and the benchmark S&P 500 index both closed below their respective resistance levels on this shortened holiday week. Elsewhere, the tech-heavy Nasdaq composite hit another fresh 2009 high as investors continue to flock to tech stocks for potential growth. However, we would be remiss not to note that volume has steadily declined as the market edges higher which is not a “good” sign.