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Santa Comes Early ! . . . Thanks Ben December 21, 2013

Posted by Tom in Thoughts.
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Santa Claus did come early this year.  I saw him, he had a beard and looked a lot like Ben Bernanke.  🙂

The FED announced that it was doing exactly what they said they were going to do, start tapering the open market purchase of government and agency bonds.  That was taken as good news by the market since the FED validated what most thought for over a year; the US economy is recovering.  What remains open is whether or not this is already “priced into the market”.  As the saying goes “If everybody knows it, it isn’t news anymore”.  We are back up in the higher part of our trend channel that began last November, 2012 (note purple lines in the chart below).

NASDAQ

So how do we answer this question?  We’re at the upper end of the trend (increased risk), the market typically corrects back down (at some point).  Well the 3995 level on the NASDAQ Composite Index (the chart above) should hold if things are “alright with the world” and certainly that lower trend channel line “must” hold.  What I’m looking at tho is the tremendous volume on Friday.  That shows supply (of stock) is coming into the market.  Year end re-balancing or is it a possible Buying Climax (the smart money selling out)?

In the coming days ahead we’ll watch for a reaction lower and see what type of volume it brings (i.e. selling).  Then perhaps a rally upwards that fails or is very weak (low volume).  That may be a sign of the tax selling that I was wondering about.  ‘Tis the season you know.

Overall I’m Bullish on the new year, it’s just that we’ll likely have a significant correction along the way and we should always be on the look out for them.  Christmas sales data will be out late next week and that could be a catalyst for a move in either direction.  I’m invested, but always looking for trouble.  I’ll leave you with two things: 1)  The current Top 10 Sectors (what’s moving short-term).        click on graphics to enlarge

Top 10 Sectors

And 2) Wishing you and your family a Merry Christmas (for those who celebrate) and a Happy Holiday Season to All.  …………..  Tom  ……………..

chart by MetaStock; table by www.HighGrowthInvestor.com; used with permission

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