Wednesday, December 26, 2007

A Post-Holiday Stock Market Review

* Continuing to See Strength - We saw fewer new highs and fewer new lows on Monday, not so unusual for a shortened pre-holiday session. There were 969 issues making fresh 20-day highs and 429 new lows. We had 55% of S&P 500 issues closing above their 50-day moving averages, up from 50% the day before. Momentum continued to be favorable, with Demand at 109 and Supply at 20. That means that Monday saw five times as many stocks closing above the volatility envelopes surrounding their short-term moving averages as closing below them.

* Technical Strength - Technical Strength has also been rising among my basket of 40 issues distributed across the eight S&P sectors. 23 issues closed Monday in uptrends, 11 neutral, and 6 in downtrends. The Technical Strength Index finished at +1220, a sizable improvement from recent readings.

* Advance-Decline Lines - The A/D Line specific to common stocks only traded on the NYSE has moved above its early December high after failing earlier to pierce its November low. We still remain below the A/D peak of October, however, which in turn was below the peak in July. The Dow 30 stocks hit a new bull market high in their A/D line. We've seen recent strength in the A/D line specific to the S&P 600 small caps--it's moved slightly above its early December peak--but it remains well below its October and July highs.

* Perspective on the Fed - This thoughtful piece from David Merkel, along with its accompanying links, highlights what the Fed has been doing, why, and implications.