For the Dow, a Curiously Lackluster Year

 | Dec 11, 2012 | 7:30 AM EST
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Let's begin today with an interesting tidbit on that ancient index, the Dow Jones Industrial Average. It has been the clear leader in the last several days, and by Monday's close it had been in the green for four trading days in a row. Four days had not seemed like a lot to me, but I checked the statistics anyway -- and it turns out that, for all of 2012, the only longer Dow winning streak was the seven-session run higher that led to the top in mid-March.

Isn't that rather curious when we consider that, in 2012, big-cap dividend-paying stocks were the place to be? The Dow is the "daddy" of these kinds of stocks, yet it managed only one winning streak longer than four days. This tells us the odds of a fifth green day are not high.

As for broader market statistics, not much has changed. Breadth continues to chug along. In fact, if we use volume, breadth on the laggard index Nasdaq has logged a higher high, thanks to beloved Apple (AAPL). While I realize I have written about this several times of late, this tells us that positive seasonality is working in smaller names.

Nasdaq Volume

At least the Russell 2000 finally outperformed on Monday, although we do need a microscope to see the move.

While the market is no longer as overbought as it was, it's also not yet oversold. I remain unable to foresee when a good oversold condition will arrive. If we can see some downside this week, then conditions on the Oscillator shape up well for a Santa Claus rally -- both the Oscillator and the 30-day moving average of the advance-decline line would read as oversold for that final week of the year.

I would note that the number of stocks making new highs is still well below where it was on Dec. 3, the last time the S&P 500 was up around 1420, as it was Monday. There were 149 stocks at new highs on Dec. 3, and Monday saw only 85 new highs. This should be improving, not contracting.

I continue to believe the upside will remain limited until the market returns to an oversold condition.

Considering that it's freezing in the Midwest, several folks asked my view on natural gas. As longtime readers will recall, I've often said nat gas traders in New York don't seem to notice the cold weather plaguing other parts of the country -- which is good for nat gas -- until they have to wear heavy coats themselves. Attention New Yorkers: It's coming your way!

In any case, natty bounced off an uptrend line during Monday's gap down, and it closed near the high of the day. So do we put more stock in the bounce off the line, or in the breakdown under $3.60 per Btu, which completes the double-top? I say that if we see a gap up above $3.60, that would produce an island bottom, which would be bullish for nat gas. If it merely continues Monday's intraday rally, then it ought to fail just shy of $3.70. I think it will rally from here, but it's a matter of how that occurs.

Natural Gas


 Overbought/Oversold Oscillator -- NYSE

 Overbought/Oversold Oscillator -- Nasdaq

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volatility is quite low here, and we could see some downsides here in the short term. ...



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