New Year, Another Failed New High

Equity markets stumbled to the close on the first trading day of 2005, not an auspicious start but hardly a deal-breaker for the year. An early morning charge on lower oil prices and lingering enthusiasm from the just-closed prior year didn't last long once the major indices had again made new 52-week highs.

Still, day one of the year is not destiny for the markets, even in the short term. Don't forget that the Dow Jones Industrials dropped almost 50 points on the first day of trading last year only to gain 300 within weeks.

On Monday, the Dow lost almost 54 points, or 0.5%, to close at 10,729.43 after hitting a morning high of 10,867.39. The S&P 500 lost 0.8% to finish at 1202.08 after hitting a high of 1217.90. And the Nasdaq Composite suffered the most, falling 1.1% to 2152.15.

The Nasdaq is putting fear in the hearts of technicians as day after day it sets a new 52-week high -- which are almost 3 1/2-half year highs as well -- and then closing lower. With today's move to 2191.60, it marked the eighth consecutive higher intraday high for the Nasdaq even as the index failed to hold onto its gains. The index has closed higher on four of those days but only once at the high for the day.

In sum, the Comp is showing signs of being overextended.

On a slightly more positive note, Business Week released its annual survey of market watchers. Last year's group was close on the Dow, with the median predicting that the blue-chip average would end 2004 at 10,750, just a bit short of the mark. The Dow median forecast for this year's crowd is 11,350, or just a 5% gain by the end of 2005. Predictions ranged from a high of 12,750 by Peter Trapp at Bifrost Partners to a low of 8000 from Bernie Schaeffer.