Trading the Holiday Grind

Author: Rob Trader

It's that time again when volume dries up and prices rise into the new year. A lot of individuals are scrambling to prepare for the holidays, even though we had a year to prepare. The big money has already done most of their year end shuffling and will be taking it easy until January.

The market is overbought and sentiment readings are at extreme levels which in the past have been the start of large sell offs and even bear markets. While I am keeping a close eye for a top, there is not much we can do but stay long stocks and commodities until the market tips its hand and distribution selling is in control. The U.S. federal government is the only wild card going into year end that should be on traders' radars. They have been doing a great job boosting prices in the equities and commodities market, but can they continue to hold things up when the big money and the proverbial herd start unloading positions in 2011?

SP500 Holiday Grind – Daily Chart

This chart shows the slow and steady grind higher that we have seen in the S&P 500. I expect this to continue into 2011 The market in my opinion is on the verge of some serious selling so long positions should be small going forward.

US Dollar On Pause For A Couple of Weeks

This 4 hour candle stick chart of the dollar shows price testing resistance (a previous high). I am expecting to see the U.S. Dollar trade sideways or possibly move closer to the previous high as we enter the new year. A sideways dollar will allow the equity and commodity markets to rise.

Weekend Conclusion:

In short, I think we could see an intraday pullback early this week and then a grind higher. The pullback would shake out some weak positions before the holiday march higher takes place. I typically don't trade much going into the holiday season and new year. I may put on a small long position if I like what I see forming on the charts, but that would likely be about it. Light volume can be very dangerous to trade because sharp price spikes up or down can occur in a blink of an eye catching traders off guard.

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About the Author

Rob Trader - Forex Expert
http://tradingtoollist.co.cc/

The market is overbought and sentiment readings are at extreme levels which in the past have been the start of large sell offs and even bear markets.

General Electric's report also revealed signs of credit weakness. The conglomerate's profit dropped 44 percent,

Bank of America loses $2.24B as loan losses rise

The federal budget deficit has surged to an all-time high of $1.42 trillion

     Listen to the headlines and don't get caught in the long in the tooth market runup. Sure the correction might have been to sharp to sudden last winter/spring, however this recent run has also gone way too far. Injected by government liquidity, big banks and investment firms pushed stocks around to achieve this run.

     We are not in a new bull market, we are in a long term bear market. Stocks do not rise 50-100% in bear markets. Take your profits as yu can but don't get caught holding long term for dow 15,000, you won't see it. Unemployment is still climbing, job creation is a facade. Consumers are stingy if not down right saving their cash and last i checked gun shops were still selling out of ammo. The government is printing and spending money faster than the presses can print it. the stock market crash of 1929 actually didnt reach it's lowest point til 1-2 years after the initial crash. the Dow closed at 230 on October 29th 1929, in July of 1932 the Dow closed at 41.