If you like Christmas tradition, the market is doing a nice job of providing some standard holiday cheer. This is exactly the sort of positive action you'd expect on Christmas Eve. It is obviously painfully thin but breadth is good, we have over 250 new highs. The only notable weakness is in oil, which is seeing the recent dead cat bounce falter a bit.
The most surprising action today is the very strong bounce in biotechnology names like bluebird bio (BLUE), Gilead (GILD), TG Therapeutics (TGTX), etc. Yesterday there was quite a bit of concern about the sharp drop of the sector. Many market players saw it as a potential sign of broader problems for the market, but it looks like the upbeat holiday mood has forestalled those issues.
The buyers continue to push, and I suspect they are receiving some assistance from the computer programs which are taking advantage of the thin trading and the lack of any selling conviction. It doesn't take a genius to figure out that the easy way for high frequency traders to make money is to keep pushing a very thin, extended market even higher.
I have quite a few last-minute Christmas chores to attend to, and I'm heading out early. I want to wish everyone a very Merry Christmas. Forget about the market and enjoy the holiday with family and friends. That is what it is all about. I'll see you on Friday.
Dec. 24, 2014 | 8:10 AM EDT
Christmas Is a State of Mind
- There tends to be a positive bias because of the holiday.
Christmas is not a time, nor a season, but a state of mind. To cherish peace and goodwill, to be plenteous in mercy, is to have the real spirit of Christmas.
--Calvin Coolidge
The main thing we need to keep in mind today is that there tends to be a positive bias because of the holiday mood. While there may be some technical issues of concern, that doesn't tend to matter much as market players are more focused on wrapping things up and preparing for the holidays.
If you listened to any business media at all yesterday, you are well aware that the DJIA took out the 18,000 level and made a new high. That sounds quite jolly but there were a few problems as well. Most notably the Nasdaq and Nasdaq 100 not only didn't make new highs but they had losses. Even more troublesome was that the leading momentum sector, biotechnology, suffered one of its worst days of the year, with a pullback of 4.66%.
The market has had five bouts of correction action this year and each time it began as a key momentum sector and small cap stocks started to underperform. There have been a few false alarms along the way, but the pullbacks have begun with a warning shot in a key sector that had been leading. If you didn't move quickly to play defense, you suffered some hits, but if you were too aggressive to raise cash you also had a very high risk of finding yourself on the sidelines as the stubborn uptrend continued.
If we weren't at the very end of the year in one of the strongest periods of time seasonally, the underlying action would be more worrisome. At this time of the year there tends to be much better underlying support, and that is especially so this year as many money managers are still hoping to rack up a little additional relative performance. It has been a poor year for active managers and they would love to bolster returns a bit more.
Obviously, the trading is going to be very thin, which creates a bit more volatility but does tend to favor the bulls as well, as they push hard to keep things aloft. Just be aware that if you are trading today it's likely to be random and choppy. We often have a day of aggressive profit taking as the year comes to an end, but that is likely to occur after Christmas.
The key today is to stay flexible and not be overly aggressive.
If you are heading out early I want to send my most sincere wishes for a Merry Christmas.
