The markets experienced a blockbuster rally starting on December 31st and carried through Wednesday’s close, due the anticipation of and the expectation that the ‘fiscal cliff’ situation would be resolved in some fashion. The DJIA jumped 471 in 2 days and the other major averaged bolted higher. As you can see in the chart, the NASDAQ Composite gapped higher yesterday and closed on the highs of the day. Not only did that average vault above its 100-dma (Indicator #2), but the MACD also crossed to the upside (Indicator#5). Additionally, the 50-dma and 200-dma were also crossed to the upside.
Therefore, the Dashboard has gone from a “2″ NEUTRAL reading to a “4″ BULLISH reading overnight. This is quite an accomplishment in one day. Be aware that part of the big rally resulted from short sellers (who were betting the ‘fiscal cliff’ talks would end in failure) who were covering their positions to minimize their losses. We will have to wait and see if this rally holds.
There is still much more the House and Senate have to work out on the budget negotiations, especially the Debt Ceiling extension. The uncertainty about these matters could result in a volatile market going forward. A full report will be provided this weekend including a review of the Dashboard’s 2012 performance.