What We Can Realistically Expect From the Market’s Latest Buy Signal

Better-than-expected economic data helped stocks close a light-volume,
pre-holiday session with modest gains yesterday. Initial jobs claims decreased,
the Conference Board's index of leading economic indicators reported the
seventh straight monthly advance, and the University of Michigan consumer
sentiment index showed that consumer confidence was improving. European markets
were higher, and our markets followed with the Dow Jones Industrial Average up
62 points to 12,170, up 0.51%; the S&P 500 rose 10 points to 1,254, up 0.83%;
and the Nasdaq gained 21 points, closing at 2,599, up 0.83%. The NYSE traded 773
million shares and the Nasdaq crossed 387 million. Advancers led decliners on
both exchanges by just under 3-to-1. Click to Enlarge The S&P 500 remains the
focus of most technicians, and despite yesterday's 10-point gain, has yet to
successfully attack its intermediate bearish resistance line or its 200-day
moving average at 1,259. Therefore, it is still in a sideways consolidation.
Resistance lines are seldom broken on low-volume, pre-holiday sessions and most
likely won't break before January despite the buy signal from MACD. However,
if the S&P 500 does break these immediate barriers, it will enter a target zone
between 1,259 and 1,325, and that would give long traders a quick profit. (In
the past week, my colleague Joe Burns closed a BIDU trade for a 158% profit, a
FSLR trade for 143.75%, and a GOOG trade for 80%. Get in on his new trades now.
) But don't expect a major breakout through the May high. That should take
much more work and many more months to accomplish. Click to Enlarge Until May,
the Nasdaq was the leader of a market that appeared to be charging ahead. But
since then, it has badly faltered, has dragged the broad indices lower, and is
still in a flat trend with a bearish bias. The 2,600 line is its first barrier,
and it closed just below it yesterday. But for it to take on a more positive
tone, it also needs to break above its 50-day moving average at 2,617 and
finally pierce its 200-day moving average at 2,662. Click to Enlarge But there
may be hope for the Nasdaq in that an anchor to its progress, the financial
group, is showing new life as evidenced by the Financial Select Sector SPDR
(NYSE: XLF ). Yesterday's drive and close above its 50-day moving average and
a new MACD buy signal are in response to better economic numbers. With over 10%
of the Nasdaq's make-up in financials, a full breakout of the sector could,
with time, propel the index through the most stubborn barriers. Todays Trading
Landscape To see a list of the companies reporting earnings today, click here .
For a list of this weeks economic reports due out, click here .