As we went into the long holiday weekend following a short trading session on Dec. 24, I was curious how the end of the year would play out.
Would the averages push higher to new all-time highs on a strong Santa Claus rally? Or would stocks hit the brakes and give us a dicey finish to a wild 2020?
So far, it’s the former that’s playing out. And it’s not just the Nasdaq hitting new all-time highs, but also the Dow Jones Industrial Average, S&P 500 and Russell 2000 -- although the latter has coughed up most of the session’s gains.
I have been asking aloud for weeks now, just when would mega-cap and large-cap tech stocks wake up?
While the gains in high-octane growth stocks have been nice, the absence of Apple (AAPL) - Get Apple Inc. Report, Amazon (AMZN) - Get Amazon.com, Inc. Report, Microsoft (MSFT) - Get Microsoft Corporation Report, Facebook (FB) - Get Meta Platforms Inc. Class A Report, Netflix (NFLX) - Get Netflix, Inc. Report and Nvidia (NVDA) - Get NVIDIA Corporation Report has been notable.
For the most part, this group has been chopping sideways. However, if they ever woke up -- and really, it’s more a question of “when” -- it could be what carries the Nasdaq significantly higher.
Is that day upon us? With the whole group up on the day, it may finally be here for a Santa Claus rally. Let’s see what that means for the Nasdaq.
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Trading the Nasdaq
On Friday Dec. 18, the Nasdaq climbed to new highs and faded from those highs, before bulls bid the index back up towards breakeven.
The next session -- on Monday the 21st -- the Nasdaq opened lower at its 10-day moving average and fell as much as 1.8% before buyers again stepped in and bid it back up. The index finished lower by 0.07% on Friday and 0.1% on Monday.
Despite the sellers’ best efforts, they couldn’t crack the Nasdaq, which was a huge sign for the bulls.
The tune is much different this Monday, with the Nasdaq quickly pushing to new highs.
If it can continue higher, I want to see if the Nasdaq can get to the 13,035 to 13,045 area. There it finds several key extension marks and may act as a solid short-term target for the bulls.
On the downside, it’s hard to be bearish with the Nasdaq above the 10-day and 21-day moving averages. It’s also hard to be too bearish if the strength in mega-cap tech continues.
Below these key short-term moving averages will push traders into a tactical stance, potentially putting the 12,075 area and 50-day moving average in play, whichever comes first.