Approaching the close of 2010
Tuesday, December 21, 2010 at 9:44AM As we get close out 2010, I have a concern that we may have already seen the best days of December. The article below points out the technical difficulties the Dow may encounter and also touches on the potential behavior of mutual / hedge fund managers which may be even more important. Typically, as quarters close, managers will look to decrease allocation in loosing holdings and increase allocation in good holdings because it makes them look better when they report holdings to investors. Also, in a market that is viewed as good, they will want to look as though they are holding less cash. All of this gaming for the opinions of investors likely leads to little if any upside with one caveat. If funds are currently sitting on an excess of cash and they decide to put it into the market prior to year end, we could see a strong close of the year.
NEW YORK (MarketWatch) -- U.S. stocks climbed on Tuesday with sentiment bolstered by a round of corporate deals, including Toronto-Dominion Bank's $6.3 billion acquisition of Chrysler Financial.
The Dow Jones Industrial Average (DJI) gained 42.35 points, or 0.4%, to 11, 520.48, with 24 of its 30 components on the rise.
The Dow "has made three attempts to close above 11,500 over the last 10 days and failed each time. That level appears to be a troublesome technical price resistance points that could prove stubborn to penetrate this week," noted Fred Dickson, chief investment strategist at Davidson Cos.
Rising for a fourth consecutive session, the Standard & Poor's 500 Index (SPX) climbed 5.36 points, or 0.4%, to 1,252.44. The financial sector proved the best performer among the index's 10 industry groups, while consumer staples lagged.
The Nasdaq Composite Index (RIXF) gained 12.63 points, or 0.5%, to 2,662.2.
On Monday, both the S&P 500 and Nasdaq notched new 2010 closing highs, levels that could keep funds from looking to hike their cash or take a more cautious stance ahead of the new year, analysts said.
"It's sort of a self-fulfilling prophecy. What can't take the market down will only make it stronger," said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
For every issue that fell, two advanced on the New York Stock Exchange, where volume approached 197 million at 10:45 a.m. Eastern.