(By Rich Bieglmeier) Tuesday was a follow through, break out day for the NASDAQ, Dow and S&P 500. As we wrote yesterday, the equity indexes were pecking the upper shell of a right angle triangle. On Tuesday, they broke on through to the other side, yeah. Bulls chased their pleasures here, found their treasures there, break on through to the other side break on through, oww!
The doors opened for Wall Street to charge through after it was reported that President Obama might give a little. The Prez reportedly is willing compromise and only tax the hell out of people making more than $400k a year. $250,000, $400,000 or $1,000,000 a year, it won't matter because a large number of people who will qualify for the higher tax will magically disappear, and you can take that to the bank!
Back to what really matter and why you are here. With the technical buy signals flashing for all the indexes – boy do we love confirmation – the S&P should challenge it 2012 highs. The Dow has some work to do, but could tag along with the S&P. The NASDAQ has the longest road to travel, and could hold up an all-out, screaming, pound the table, triple-confirmation of all the indexes trading at new highs simultaneously.
But, they better all get to new highs. If not, one or all three indexes will draw and obvious head and shoulders pattern. We wrote about it and posted an illustration yesterday. As every novice chart-watcher knows, the head and shoulders pattern is a reversal pattern and no good for stocks.
Perhaps, this morning's housing starts will be good for investors and help stocks continue higher before the Christmas break. Wall Street expects the annual pace figure to come in at 865,000, down from last month's pace of 894,000. The five-month trend is heading higher, and the late fall/ early winter has been mild across the country. As a result, we think expectations could be low, and an upside surprise is in store.
Once again, we'd expect fiscal cliff talks and rumors to dominate and determine today's action. We also expect volume to start to wind down starting this afternoon as many get a jumpstart on the long weekend.
That's it for today, Happy Trading.