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Stocks Clearly In An Uptrend

Have we exhausted all the sellers? Don't let yesterday's modest declines fool you: stocks are clearly in an uptrend. There were very few sellers yesterday, and breadth was 2-1 positive on the NYSE. After a 3-day rally bought stocks into short-term overbought territory, what we SHOULD HAVE SEEN was a sell-into-the rally drop of 200-400 points on the Dow with heavier volume.

That we didn't see it is a good sign. This is what is called a "consolidation phase," and while it does not guarantee the rally will continue, it is an encouraging sign.

Lowry notes that since the Nov. 20 market low, the DJI has turned in a gain of 18.5%, while the S&P 500 has risen by 23.3% and NASDAQ by 23.7%. These are very solid gains; so to the question, "Do you think the market can rally?," the answer is, "It already has."

What's lacking? More demand. We need buyers to get a little more enthusiastic; without it, we are at best consigned to move sideways, which for many is the likeliest course for the next few months.

Elsewhere:

1) Since the end of October, gold has steadily risen, while oil has almost steadily declined. Little wonder that the major commodity indices (Goldman Sachs Commodity Index and Dow-Jones-AIG Commodity Index) are rebalancing, where the weighting for oil and copper is increasing, while the weighting for gold is decreasing.

Copper and oil have both hit 4-week highs this morning As copper has moved up, Rio Tinto is up 8 percent, Rio Doce up 5 percent. Many commodity-based stocks, including Mittal Steel ,Cemex , and Freeport McMoran, a re trading up this morning

2) Dow Chemical said it will pursue legal action against Petrochemical Industries Company of Kuwait, which terminated its agreement to create a joint venture with Dow.

Continental,American and United reported December traffic, the good news is that the percentage of seats filled increased, the bad news is that traffic decreased. This is due to airlines reducing the amount of flights they are flying.

Fertilizer giant Mosaic reported earnings well above expectations, and noted that sales weakened significantly at the end of last quarter, and said it expects crop nutrient sales to remain weak through the quarter.

Micron up 3 percent as DRAM prices have been rising recently; the Korean Times says that Samsung plans to cut its investment in semiconductor chips by more than half in 2009.

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CNBC's Names in the News:

Toyota

Dow Chemical

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Questions? Comments? tradertalk@cnbc.com

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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