New Year Kicks Off With Major Bullish Signal

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Stocks blasted into the first trading day of the new year like a rocket. Better-than-expected economic data from around the globe was attributed to the gain. In Germany, the number of jobless claims fell, and European manufacturing levels fell but at a lower rate than expected. And in the Far East, China said that manufacturing increased in December.

At the close, the Dow Jones Industrial Average had gained 180 points to 12,397, the S&P 500 rose 19 points to 1,277, and the Nasdaq gained 44 points at 2,649. The NYSE traded 854 million shares, and the Nasdaq crossed 444 million. On both exchanges, advancers were ahead of decliners by just over 3-to-1.

DJI Chart
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The Dow has been the leading index on advances since August when a shift from more speculative securities occurred. And yesterday, the index broke to a new five-month high by punching through the stubborn resistance line at 12,250. The new high confirms that a new intermediate-term uptrend has begun. Yesterday’s strong advance puts the Dow within striking distance of the important highs of last year at 12,794 in July and 12,928 in May.

DJT Chart
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The break through resistance by the Dow industrials has major significance because it has been backed by a break to a new five-month high by its companion index, the Dow Jones Transportation Index. In other words, the change to an intermediate uptrend has been confirmed under the Dow Theory. Now, with both Dow indices in positive territory, a drive to the highs of last year is likely.

UUP Chart
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In yesterday’s Daily Market Outlook I noted, “Since late October, the U.S. markets have been dominated by the higher U.S. dollar and its inverse impact on stocks. But the dollar appears to have run into difficulty as momentum lags and the stochastic, as illustrated by the PowerShares DB US Dollar Index Bullish Fund (NYSE:UUP), flashes a sell signal.”

At the opening bell, UUP opened on a gap down, piercing its 20-day moving average as well as the support line of its bull channel. By the close, the MACD indicator flashed a sell signal as well, confirming that lower prices are almost certain. The first line of support for UUP is the 50-day moving average at $22, and the second is the 200-day moving average at $21.65.

Conclusion: With a new breakout for the two major Dow indices and a breakdown of the U.S. dollar, 2012 could not have started better. The long-term bear market is still with us, but there appears to be enough positive pressure to put the old highs behind us and establish a bull market — if the Europeans can keep their house in order long enough to let the technical picture continue to improve.

The big question is: Can the Europeans keep a lid on further talks of contagion and/or a split up of the euro? It is time to turn bullish, but with your fingers crossed.

If you’re looking for help making profitable trades in the new year, my colleague Joe Burns just closed a Baidu.com (NASDAQ:BIDU) trade for a 158% profit, a First Solar (NASDAQ:FSLR) trade for 143.75%, and a Google (NASDAQ:GOOG) trade for 80%. Get in on his new trades now.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2012/01/daily-stock-market-news-new-year-kicks-off-with-major-bullish-signal/.

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