The Higher Holiday Grind
NEW YORK (
) -- 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 already has done most of its 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 selloffs and even bear markets. While I am keeping a close eye for a top, there isn't much we can do but stay long stocks and commodities until the market tips its hand and distribution selling is in control. The federal government is the only wild card going into the year-end that should be on traders' radars. It has been doing a great job boosting prices in the equities and commodities markets, but can the government continue to hold things up when the big money and the proverbial herd start unloading positions in 2011?
S&P 500 Holiday Grind -- Daily Chart
The 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.
U.S. Dollar On Pause
This four-hour candlestick 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.
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.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
Chris Vermeulen is founder of the popular trading sites www.thegoldandoilguy.com and www.ActiveTradingPartners.com. There he shares his highly successful, low-risk trading method. Since 2001, Chris has been a leader in teaching others to skillfully trade in gold, silver, oil and stocks in both bull and bear markets.