Tuesday, December 29, 2009

Weary Santa Rally Stumbles; Stocks End Six-Day Streak

Just a day after vaulting to new multi-month and 52-week highs, the major averages took a breather with just two days remaining to trade in 2009. In what has been a banner year for stocks - at least over the final three quarters - there's little doubt that stocks are in need of a little sideways trade, likely until the beginning of earnings releases which begin in about two weeks.

Just like old St. Nick must be tuckered out after a long journey, so too with stocks in general. Many equities are at or near their highs and investors are taking a wait-and-see attitude. Life for traders and investors should return to a more normal environment once the calendar flips.

There was a little bit of economic news on this very sluggish holiday week, though the data was hardly significant. The S&P/Case-Shiller Home Price Index [PDF] for October showed home prices increasing for the seventh straight month, though the rate of improvement was slowing slightly and not all areas of the country experienced gains. David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s, described the report as "flat."

The Conference Board's Consumer Confidence Index jumped from 50.6 to 52.9, with the rise attributed to improving perceptions of the labor market. The number is still far below the benchmark of 90, considered to depict a "strong" economy.

Markets mostly shrugged off any data, and, with Wall Street sparsely populated once again, much of the activity was confined to squaring up or adding to positions before the year's end. Day traders were active, though overall volume was dismal for the second straight session. Overall volume was lower than Monday's, a sure sign that the incipient rally has run out of steam for the year, but could resume once volume returns to more reasonable levels.

Dow 10,545.41, -1.67 (0.02%)
NASDAQ 2,288.40, -2.68 (0.12%)
S&P 500 1,126.19, -1.59 (0.14%)
NYSE Composite 7,252.19, -9.05 (0.12%)

Decliners outperformed advancing issues for the second straight session, though by the narrowest of margins, 3220-3210. Both new highs (412) and new lows (59) returned lower numbers than on Monday.

NYSE Volume 2,808,519,250
NASDAQ Volume 1,191,436,875

The dollar was stronger against foreign currencies, with the Dollar Index trading in a range right around a key support/resistance area just below 78. The greenback is well off the lows of two months ago, which were in the low 74 range.

Oil managed a gain of just 10 cents, to $78.87. Gold, which generally trades in the opposite direction of the dollar, did so, losing $9.80, to $1,098.10. Silver also fell, down 46 cents, to $17.10.

With just two trading days left in 2009, it would neither be surprising nor upsetting if stocks took a slight haircut into the end of the year of about 1-1.5%. In fact, such a move on low volume might actually be a sign of health, signifying that investors remain cautious, though optimistic about prospects for 2010.

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