FirstAlert(tm) Daily 11/18: Don’t Look Now, But Santa’s Sleds Are Warming Up

- Technical Analysis -

November 18, 2009 (FinancialWire) (By Dr. Joe Duarte) — The S&P 500 SPDR (NYSE: SPY) and the Nasdaq 100 Trust (NASDAQ: QQQQ) ETFs have both made new highs to start the week. And while that’s good, some areas of the market are still not firing on all cylinders.

Someone’s got to do it, so we’re going to say it. The market is nearing the two biggest holiday rally periods of the year, Thanksgiving and Christmas, which means that talk of the Santa Claus rally is about to hit the airwaves. That means that it’s a good opportunity to look through the hype and see what’s really happening when the market strategists for Wall Street firms hit CNBC, Fox Business News, and the major news outlets.

The Dow Jones Industrial Average and the S&P 500, along with the Nasdaq 100 Index, have all taken over the leadership of the market. That means that money is moving into blue chip and large cap stocks at the expense of the small stocks. This is clearly illustrated by the fact that the Russell 2000 index has yet to confirm the new highs from the March bottom on the big cap indexes.

The real question for investors is whether this means that the market is near a major top, or whether it just means that the small stocks are not as attractive to investors at this time. If you look at the market, and what traditionally makes bull runs last, this one continues to have all the ingredients. For one thing, interest rates remain low. There is still plenty of pessimism. Just look at any of the notes written by bank analyst Meredith Whitney and gloom and doom prophets such as Nouriel Roubini and Marc Faber. And there is still some cash out there waiting to come into the market.

When you add the fact that it’s that time of the year when good cheer tends to take over, no matter how much people try to resist it, you have the ingredients of higher stock prices.

The problem is that every good party has a hangover around the corner. And 1999 comes to mind as such a party, when the Nasdaq soared in the last three months, only to enter a three-year bear market in the New Year.

So what should anyone do? Pay attention to each open position individually, while watching the market. Money is moving into blue chip stocks. That means that this is where investors should be looking. It’s probably too late to make big bets. But if you’ve missed the rally, you may be better off buying a blue chip dominated ETF such as the Dow Jones Industrials Diamonds (NYSE: DIA), just to stay with the dominant trend of the moment.

What about your time frame? Keeping it short is probably the best way to go, which means that holding onto your stocks as long as they stay above their 20 and 50 day moving averages is prudent. Otherwise, don’t be surprised if volatility appears in a big way, especially later this week as options expiration develops.

Finally, if the Santa Claus rally choruses begin, make sure that the market is actually doing what it’s supposed to do during this time of the year, which is to rise. If the talking heads are giddy and stocks are falling, don’t believe what you don’t see.

[Go to http://www.financialwire.net/?s=joe+duarte to see more commentaries by Dr. Joe Duarte.]

FirstAlert(tm) “Money Index” is an indicator of the depth of market direction or indirection. While not always including the same stocks, the NYSE/NASDAQ/AMEX 25 Most Actives and NYSE/NASDAQ/AMEX greatest Percentage Losers and Percentage Winners (weighted against pure monetary loss/gain) indicate the direction in which the mass of money is flowing, as well as the general focus of the market. Of the Most Actives, last session’s trading showed 18 advancers versus 7 decliners. Volume leaders were led by the SPDR Trust ETF (NYSE: SPY) trading 32,810,047 shares closing at $111.33 (up 0.1%), Citigroup Inc. (NYSE: C) trading 31,869,800 shares closing at $4.24 (up 1.4%), and the PowerShares QQQ Trust ETF (NASDAQ: QQQQ) trading 31,380,691 shares closing at $44.6 (up 0.3%). Of last session’s Greatest Percentage Losers, stocks taking the greatest monetary losses were led by Jacobs Engineering Group Inc. (NYSE: JEC) trading on volume of 3,038,400 shares (losing $813.6 million), Smith International Inc. (NYSE: SII) trading on volume of 6,426,100 shares (losing $784.5 million) and Kennedy Wilson, Inc. (AMEX: KWIC) trading on volume of 37,300 shares (losing $272.1 million). Of last session’s Greatest Percentage Winners, stocks making the greatest monetary gains were led by Semitool, Inc. (NASDAQ: SMTL) trading on volume of 13,205,540 shares (gaining $83.2 million), Poniard Pharmaceuticals, Inc. (NASDAQ: PARD) trading on volume of 6,936,619 shares (gaining $22.6 million) and Anchor BanCorp Wisconsin, Inc. (NASDAQ: ABCW) trading on volume of 573,743 shares (gaining $6.4 million). Go to http://www.financialwire.net/?s=%22%27Money+Index%27+Synopsis for all the most recent FirstAlert(tm) “Money Index” Synopses.

The FirstAlert(tm) Economics Calendar lists Housing StartS&Building Permits for October (8:30 a.m.), Consumer Price Index (CPI) for October (8:30 a.m.), EIA Petroleum Inventories (11 a.m.).

The FirstAlert(tm) Events Calendar showcases AerCap Holdings Investor Meeting; ALTH, ARIA at Windhover Information Therapeutic Area Partnerships Conference; CCOI, ABVT, PAET, RAX at Thomas Weisel Partners Emerging Communications Conference; EPD at RBC Energy Conference; GWR, AAWW, CNW, JBHT at Stephens Fall Investment Conference; HERO, NBL, XOM, DVR at Bank of America Securities Energy Conference; MAS, PHM, MTH, TOL at UBS Building and Building Products Conference; MTA, UMG, VMED, NICE at Morgan Stanley TMT Conference; MYE, MWA, UTX, GE at Oppenheimer & Co. Industrials Conference; NBR, SD at UBS Energy Mini-Conference; ONXX, XRAY, MYGN, HGSI at Lazard Capital Healthcare Conference.

FirstAlert(tm) Website of the Day: http://www.couchsurfing.org/

Quote of the Day: “I could prove God statistically.” Dr. George H. Gallup

Today is: Latvian Independence Day, GIS Day, Mickey Mouse Day.

Happy Birthday: Sojourner Truth, Dorothea Dix, Clarence Day, George Gallup, Imogene Coca, Johnny Mercer, Hank Ballard, Alan Shepard, Alan Dean Foster, Warren Moon.

Today in History: A seawall at the Zuider Zee dike broke in 1421, flooding 72 villages and killing about 10,000 people in the Netherlands. Christopher Columbus first sighted what was now Puerto Rico in 1493. Mark Twain’s story The Celebrated Jumping Frog of Calaveras County was published in the New York Saturday Press in 1865. Release of the animated short Steamboat Willie, the first fully synchronized sound cartoon, directed by Walt Disney and Ub Iwerks, featured the second appearances of cartoon stars Mickey and Minnie Mouse in 1928. Calvin and Hobbes, a comic strip by Bill Watterson, was first published in 1985. World-renowned bird expert Tony Silva was sentenced to seven years in prison without parole in 1996 for leading an illegal parrot smuggling ring. The Nintendo GameCube was released in North America in 2001.

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