On Monday, stocks popped high on hopes of a deal to avoid the "fiscal cliff". Senate passed a bill on New Year’s Eve, leaving House no time to make any more political maneuver. Yesterday evening, House also passed the bill without any changes. As I said in my Market Forecast this weekend, "While there are many analysts that think the markets may sell on the news even if a deal is reached, I think this market will rally if we do get a deal to avoid the ‘fiscal cliff’. " Indeed, there was no mistake about this rally. SPX popped higher today and never looked back.
The Dow was up +308.41 points. SPX closed at 1462.52, up +2.54%, while Nasdaq vaulted more than +3%, closing at 3112.26. AAPL went as high as $555 today; that’s $45 higher than last Friday’s close! The rally was broad-based on solid volume. Every major sector was higher:
SOXX (semiconductors) popped more than +4%. FDN (internet) jumped more than +3%. XLE (energy) climbed +2.21%, while OIH (oil services) bounced almost +3%. XLF (financials) gained +2.9%.
This two-day rally has gone very far. I think we should see some profit-taking tomorrow. Technically speaking, just about every sector is short-term overbought. I suspect that there will still be some individual stocks that will push higher. For those that missed today’s pop, they will be looking for lagging stocks to buy into. VIX dropped sharply and is testing the support between 15 and 14. This is an ideal place for the rally to continue, after a bit of consolidation.
We had a nice month of trading in December. Especially in the past week, we’ve hit many triple-digit winners, including GLD, VMW, NTAP, AMZN and AAPL. Here are the closed trades for the month:
LNKD and NFLX stood out today as they went the opposite direction as the broader market and missed the big rally. LNKD was downgraded by Barclays, and closed down 1.89%. NFLX reversed the morning gains and closed down 0.63% for the day. We’ll watch these two stocks tomorrow to see if buyers would try to come in and push these higher, as they are usually good momentum stocks.
Don’t be too eager to trade tomorrow. If things continue to push higher at open, you probably won’t want to chase things. If things are soft at open, you can probably get better prices later in the day if you’re looking for new trades.
Good night and HappyTrading! ™