WALL STREET >>> Tax Talk Hold Dow Hostage; Nasdaq Rises For 7th Day

INVESTORS NON-REACTIVE TO SOLID JOBS DATA

Wall Street ended in a stalemate on Thursday as the Nasdaq Composite advanced for the seventh day in a row, but uncertainty over what will happen to the expiring Bush tax cuts prevented the Dow from joining its peers at fresh 2010 highs.

Stocks shuffled around the breakeven line today, as traders expressed some very mild optimism over the latest employment data. Initial jobless claims declined by 17,000 last week to 421,000, exceeding analysts' expectations for a drop to 425,000. Meanwhile, the four-week average of initial claims backpedaled to 427,500 -- its lowest level in more than two years. Traders initially seized on this report as evidence of a tentative recovery in the jobs market, with the major indexes opening solidly higher.

However, the bulls had trouble maintaining their early enthusiasm, and stocks spent the rest of the session whittling their gains. In fact, the Dow Jones Industrial Average soon fell into the red, with the blue chip barometer dragged lower by a lackluster forecast from DuPont (DD). This divergence continued through the end of the session, with the Dow standing out as the only major market index to settle on the south side of breakeven.

Aside from negotiations in Washington to extend the Bush tax cuts, Wall Street struggled to find a catalyst, despite a larger-than-expected decline in weekly jobless claims and red-hot bank stocks like Bank of America.

“There’s really nothing to push the market here. As a result it’s kind of settling under its own weight a little bit,” said Peter Kenny, managing director at Knight Capital Group. “The buyers and sellers have all kind of stepped away.”

However, there's no need to panic -- the Dow Jones Industrial Average (DJIA – 11,370.06) shed just 2.4 points, or 0.02%, as 18 of its 30 components closed higher. Bank of America (BAC) led the advancing equities with a 5.4% gain, while McDonald's (MCD) and DuPont set the tone for the dozen decliners. The Dow continues to hover in a narrow trading range between 11,320 and 11,420, which has confined the index's progress since Dec. 3.

The S&P 500 Index (SPX – 1,233.00) tacked on 4.7 points, or 0.4%, notching its third straight day of slim gains. However, the 1,235 region is emerging as short-term resistance for the broad-market bellwether. Finally, the Nasdaq Composite (COMP – 2,616.67) bested its peers by tagging a new annual high of 2,624.84 -- its best price since January 2008. The tech-rich COMP eventually settled for a slim daily advance of 7.5 points, or 0.3%, to collect its second consecutive daily close above the 2,600 level.

The bulls have tried and failed countless times this week to lift the Dow above its 2010 high of 11444, which was set on November 5. On the other hand, the blue chips have held onto last week's impressive rally of nearly 300 points.
“I think investor caution is still really there. Investors really want to believe in the market but at the end of the day” there are lingering worries about Europe’s debt crisis and tensions in Asia, said Jonathan Corpina, senior managing partner at Meridian Equity Partners.

“As we get into the end of the year, I think we’re going to see investors begin to take money off the table. Profit takings will soon emerge - no questions about that.”

CRUDE OIL FUTURES

Crude futures eked out a modest gain today, despite continued strength in the U.S. dollar. Instead, traders focused on the day's better-than-forecast jobs data, which stoked some optimism about a future uptick in energy demand. Traders also learned of an unplanned outage at a 150,000 barrel-per-day refinery operated by Hess (HES), which contributed to a substantial jump in gasoline futures. Against this backdrop, crude oil for January delivery tacked on 9 cents, or 0.1%, to settle at $88.37 per barrel.

TECHNICAL ANALYSIS

Dow Jones Industrial Average

The Dow closed lower due to profit taking on Thursday as it consolidated some of the rally off November's low. The mid-range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are overbought and are turning bearish hinting that a short-term top might be in or is near.
Closes below the 20-day moving average crossing at 11,205 would temper the near-term bullish outlook in the market. If the Dow extends the aforementioned rally, the August 2008 high crossing at 11,867 is the next upside target.
First resistance is Tuesday's high crossing at 11,450. Second resistance is the August 2008 high crossing at 11,867.
First support is the 10-day moving average crossing at 11,261. Second support is the 20-day moving average crossing at 11,205.

HAPPY TRADING