When the market opened on Tuesday, there seemed to be little reason for trading with the Dow trading in a very narrow 40 point range all day. The Dow managed another gain, 26 points, taking it to an all time new high but there just was not any conviction to the move. The Dow did trade just above the trading high on the first trading day of the year.
After the market closed, INTC announced their earnings which were just a penny above estimates. INTC’s earnings were just 39% lower than for the same quarter a year ago but expectations were a bit lower than that. This news caused some action in the after hours trading with INTC jumping on the news initially and finally giving up about 4% to end the late session. After that report, Japan opened on a sour note but at the last check was trading up again as we write this (around 11 pm CST).
And, with our futures staging a comeback here with Japan, the market may just forget all about INTC by morning. After all, trading down on news from INTC would be like admitting there might be a problem and we just couldn’t have that. Normally, the market likes to get an early sell off so there are bargain basement prices to be had and no more crazy sellers to be found. One day that will not be the case and we will have a down opening that just keeps on going down—that day could come on Wednesday.
As we look at the technical indicators tonight, we see a lack of upside momentum even though prices are pushing ahead. This is the most dramatic lack of underlying strength that we have seen in over six months. What normally happens is a settling of prices for a few days and that gives way to some buying that pushes prices higher.
The last few days of new highs in the Dow have been accompanied by very little in the way of underlying technical strength. Volume has been light in this move especially Tuesday with less volume than last Friday. We could list all of them but the point is that this market is finally showing very serious technical weakness. This coincides with our analysis of the last month or so that puts a new high in the Dow in the first two weeks of trading and then a pullback. Well, the first two weeks of trading are about up and the Dow has made a closing high on Tuesday. Let’s see what happens next.
Look for December PPI on Wednesday morning with the Fed’s beige book in the afternoon.
Dow Industrials: 12,582.08 +26.51 (third straight new high)
VIX: 10.74 (up on the day)