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Tuesday, December 14, 2010

WALL STREET : Dow Backpedals From New Highs Anid Late Flurry Selling

Late Slide Derails Nasdaq Hot Streak
Dow Retreats Off New Highs
Wall Street ended in a deadlock on Monday as a late-day slide led by technology stocks prevented the Dow from landing at a fresh 2010 closing high and put a stop to the Nasdaq Composite's eight-day win streak.

Without so much as batting an eye, stocks resumed Friday's rally right out of the gate this morning, as investors celebrated China's surprising decision to maintain interest rates and a deluge of corporate deal-making. Just a session after boosting its dividend, General Electric led the merger-and-acquisition charge with its $1.3 billion bid for Wellstream Holdings, while tech titan Dell Inc. confirmed its $960 million offer for Compellent Technologies . The onslaught of M&A news bolstered optimism about America's collective corporate balance sheet, and – along with the expected congressional passage of extended tax breaks – helped the major market indexes, including the Dow, to fresh multi-year peaks.

However, in the wake of the bullish boom of late, investors opted to cash in their proverbial chips in the final hour of trading, with stocks giving up the bulk of their gains by the bell.

After tagging a fresh two-year peak of 11,480.03 in intraday activity, the Dow Jones Industrial Average (DJIA – 11,428.56) chipped away at its lead in the final minutes of trading, settling with a gain of 18.2 points, or 0.2%. Exactly half of the Dow's 30 blue chips ended in the black, with Caterpillar pacing the 15 advancing equities, while Hewlett-Packard led the laggards in the wake of a rare bearish note.

The S&P 500 Index (SPX – 1,240.46) also rallied to a new multi-year acme of 1,246.73, but surrendered nearly all of its lead to end just 0.1 point higher. Nevertheless, the broad-market barometer maintained its perch atop the 1,240 level for the second straight session – a feat not accomplished since September 2008.

Finally, the Nasdaq Composite (COMP – 2,624.91) fared the worst of the three, giving up 12.6 points, or 0.5%, by the bell. However, the tech-rich index topped out at 2,645.79 during the course of the session, marking its loftiest level in almost three years.

Despite the late-day fizzle, many market participants see Wall Street's bullishness continuing through the end of the year.

ANALYST QUOTES : “I think we are seeing a continuation of the Santa Clause rally, aided of course by the Chinese not raising their interest rates. I think it’s a pretty good trend in place.”

The Dow closed higher on Monday and above resistance marked by November's high crossing at 11,451. The low-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are overbought, diverging but are turning neutral to bullish signaling that additional short-term gains are still possible.
If the Dow extends this year's rally, the August 2008 high crossing at 11,867 is the next upside target. Closes below the 20-day moving average crossing at 11,224 would temper the near-term bullish outlook in the market.

First resistance is today's high crossing at 11,480. Second resistance is the August 2008 high crossing at 11,867. First support is the 10-day moving average crossing at 11,330. Second support is the 20-day moving average crossing at 11,224.
Crude and gold futures capitalized on China's steady interest rate and a weaker dollar
Crude futures ended higher today, after the Organization of Petroleum Exporting Countries (OPEC) opted to keep oil output steady at almost 25 million barrels a day. In addition, black gold also benefited from China's decision to hold interest rates steady, despite escalating inflation. Against this backdrop, January-dated crude oil futures added 82 cents, or 0.9%, to settle at $88.61 per barrel.

Gold futures also finished in the black today, after expectations for a Chinese interest-rate hike failed to materialize over the weekend. Furthermore, data showing a higher-than-anticipated increase in China's consumer price index last month bolstered gold's appeal as an inflationary hedge. Meanwhile, an ailing greenback also aided the precious metal's uptick, making it less expensive for foreign-currency holders to scoop up the dollar-denominated commodity. By the close, gold for February delivery advanced $13.10, or 1%, to end at $1,398 an ounce.


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