Hello everyone, I hope you’re all having a great end to 2010 and enjoying the upcoming Holiday’s….I am sorry to say that like last week, I must also send out a text only update this week as well…I have not regained my voice but the doctors tell me it will be at least 2-3 weeks…well, I am in week # 1 and I already miss not being able to talk, but I hope this blog post will suffice…as soon as I get my voice back all of you will be some of the first to know….thanks again for your understanding…now, let’s take a look at the past week’s market action.

Improving economic numbers helped lift equities in recent weeks, and this most recent week was not an exception. The Dow last week gained 0.7%, while the S&P 500 rose 0.3% and the Nasdaq climbed 0.2%.   So now the US stock market sits at its loftiest perch since before Lehman Brothers collapsed over two years ago….

On one side of the equation you have the Bulls that will argue the combination of improving economic data, stronger corporate fundamentals and recent clarity on future taxes should propel equities even further.  Conversely, market bears contend the U.S. economy remains dependant on the cheap money supplied by the Federal Reserve, that U.S. debt levels will someday need to be addressed, and that the impact on stock valuations once the scenario changes is uncertain.  Oh, and let’s not forget what is going on over in Europe with their sovereign debt issues.

Since March 9, 2009, total returns for the S&P 500 have risen an amazing 91.1%, and most of that growth has come without the participation of individual investors. And since the May 6 flash crash many more individuals existed equities in masse.  Folks have to keep in mind that roughly 50% of the S&P 500 profits come from offshore so we don’t really need to have a booming growth here in the US to support rising corporate profits.

But as you can see in the US Bond Markets the yields have been moving upward recently while the bonds are moving down…this will support a stronger dollar but at what cost to US equities?  I personally believe this will be the question of 2011…the impact of interest rates on overall continued growth of the US Equities markets.

For investors keep in mind the next two weeks we will see less volume in the markets and possibly more volatility.  The consumer side of the economy seems to be on the upswing lately at least and economists will be watching closely this coming week to see if business spending keeps pace. This will be why the durable-goods orders report for November will be the key release of this holiday-shortened week…remember durable-good orders feel a sharp 3.4% in October with widespread declines across sectors. So now I believe analysts will want to see whether the weakness in October was an aberration. On Thursday, the Gov will release the new-home sales report at 10:00 a.m. but the number I will be interested in is when the Gov will also release the third and final revision to the third-quarter gross domestic product. Stronger-than-expected inventory building in September is expected to boost GDP to a 2.8% rate from the prior estimate of a 2.5% gain.

For those of you that have followed along with these blog posts then I hope they have been very helpful for you and your trading/investing strategies…we have made some very good calls here both to the upside and the downside and I look forward to an equally rewarding 2011.

Before I wrap it up let’s take a quick look at the S&P and the Russell…first up is the S&P E-Mini’s but let’s start with the weekly chart first….as you can see, the weekly shows we still have upward mobility available…the MACD is still showing strength but we finished atop the 61% Fib level with a candlestick doji which does show market indecision.  The true Wave count on this chart is not correct as I believe we are in a 3 Wave up on the weekly….

If you look at the Daily Chart of the S&P E-Mini below you can see where clearly we have run into strong resistance….downside support continues to sit at the 50 EMA as indicated on the chart…the MACD shows bearish divergence as well indicating a possible pullback…

Let’s look at the Russell 2000 which seems to be on a very strong bullish run here….as you can quickly see in this weekly chart of the Russell, it has run further and faster than all the other indices….this tells me more capital is seeking to find riskier type bets than bonds and treasuries….when the risk trade is off then you will see the Russell move faster, both up and down….you can see the upside resistance point is 800 which we have almost hit so far….

So, as we approach the end of the 2010 it has been a really good year for us…we’ve been able to capture both strong bullish moves as well as the big bearish move we caught this past April….and as usual the markets will no doubt have more surprises in place for us and it will be only those that are aware of what to look at and how to prepare will be able to best capitalize on them….

Trade Smart – Not Often

hpb