9:00am (EST)
The bulls came into last week facing an uphill battle following comments from European Central Bank chief Mario Draghi and the death of North Korean leader Kim Jong-il. The bears were already pushing the bottom of the current trading range and Monday’s 1% pullback pushed the indexes to their tipping point.
We had been warning of a test to lower levels of support for weeks and on Tuesday morning we said the bulls needed to make a stand or risk a full blown bear attack. We also mentioned that “Mario” had said the markets weren’t pricing in the “good things” the ECB was doing and that the VIX was still headed to 22.5.
Futures were higher Tuesday morning by 0.5% when the European markets opened for trading so there we knew when we hit the rack there was a chance for a rebound. When we woke up for our morning cup of java, we were pleasantly surprised to see futures up 1%.
Yes, Wall Street was caught napping as the market soared 3% after Spain was able to get sweeter deals on their debt offerings following cut-rate deals by the European Central Bank (ECB). Economic news here at home was also stellar with the Housing sector showing promising signs of getting better.
We were a little worried Tuesday’s rally would fizzle because the “pros” have been trying to fade them but the shorts ran for cover as the Dow closed back above 12,000 and the S&P made a run a 1,250. The Nasdaq ended the session above 2,600 and the VIX settled at 23.22, down 7%.
We were anxious to see if the momentum would continue into Wednesday and we weren’t too surprised to see a test back down to support. The talking heads spend much of the session wondering why 500-some banks would borrow $500 billion euros. Duh, it is cheaper to borrow money at 1% for 3 years than it is at 4%. In any event, the bulls were able to power the market higher for the most past as the Dow and S&P finished with slight gains. Oracle (ORCL, $26.06, up $0.27) weighed on Tech after missing Wall Street’s earnings estimates by a mile. Shares fell 14% that day. The VIX closed at 21.43, down 1.79.
Thursday’s action was tepid at first despite another snazzy jobs report. The pace picked up steam after other economic news came in good throughout the session as the market ended higher by 0.7%, on average.
Heading into Friday, the bulls had a comfortable lead for the week but got more good news after the knuckleheads in DC came up with a short-term “agreement” to the tax cuts. The bulls were able to crack another layer of resistance by lunchtime and spent much of the session holding their gains. However, the last 30 minutes of trading saw another surge higher as some traders wanted to get in ahead of the possible Santa Claus rally.
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