As we look at the market this evening, we see a whole lot of bullishness and very little price movement to justify the bullishness. Yes, the indexes are at relative new highs and the Dow itself is near a record high. Still, with all of the optimism out there, prices are very well contained. Looking at the NDX, the NASDAQ 100, for the last five days, it has traded in a 20 point range. This is not the type of “breakout” move you would expect for an index that has just made multiyear highs.
We suggest that the advance is definitely “long in the tooth”. (What does that mean???) The market wants to stop going up but it has followed a very narrow channel on the way up from the lows of this past summer. This means there has been no room for the bulls to catch their collective breath. We think that the market will just have to hiccup and the bulls will scramble to the safety of cash.
Tuesday’s trading was very narrow and on pretty light pre-holiday trading. The Dow was up a magnificent 5 points. But then the market closed…
That’s when DELL announced their delayed earnings. While saying the earnings were preliminary, because of government and internal investigations into its accounting, DELL said that earnings were higher than expected in its third quarter. The stock enjoyed some very intense buying after the announcement pushing the stock up over $2. What is going on here? The stock should be something that scares people but it has decided not to go down during this period.
We expect very light trading over the next two days, Wednesday and Friday. The Friday after Thanksgiving has had some very big down days, usually on light volume, and this Friday could deliver one of those types of days. We will wait and see what happens due to the shortened holiday trading.
With that in mind, the Update will not publish another post until Sunday evening.
We wish all of you a delicious Thanksgiving. This is our favorite weekend of the year so we will be enjoying it. There are many things to be thankful for. One thing for us is your continued interest in the Update. See you back here again next week.
Dow Industrials: 12,321.59 +5.05
VIX: 9.90 (single digits again)