2008 post-holiday market analysis

I'm technically still on holiday until January 12, so I'll keep my posts short. I almost didn't want to write at all, but I feel that recent market action has been noteworthy. So here it is.

The Christmas/New Year week has been nothing but up with next to nothing volume in the markets. However, we have finally broken our recent downtrend from October. See Figure 1. The next obvious target is 1000 on the S&P. However, because of the holiday low volume, I wouldn't bet my farm on this move. Furthermore, on both of these breakout days in the past 2 days, we have significant end-of-day sell-offs, see Figure 2.

In addition, the indicators are showing signs of weakness. However, that can be explained by my use of volume weighted indicators. This low-volume holiday week upmove would no doubt be read as weak by my indicators.

All in all, I would just intrepret last week's action as noise in general. The breakout confirmation should happen early next week. And it's an obvious one at that, we'll just need to see if we can hold above the channel.

[caption id="attachment_988" align="aligncenter" width="500" caption="S&P 500"]S&P 500[/caption]

[caption id="attachment_987" align="aligncenter" width="500" caption="S&P 500"]S&P 500[/caption]