The animal spirits on Wall Street continue to demonstrate bullish tendencies. A midday downturn that had some traders whispering that the market had topped proved fleeting, and major averages closed uniformly higher.
After trading as low as 8756.02, the
Dow Jones Industrial Average
closed up 0.5%, to 8849.40. The
added 0.3%, to 932.89 vs. its earlier best of 937.15 and nadir of 923.31. Meanwhile, the
gained 0.9%, to 1482 after having traded as high as 1486.90 and as low as 1461.10.
In the afternoon, only the Dow was able to exceed its morning high of 8866.82, and by just two points. The Dow's intraday apex of 8868.87 and the morning highs for the S&P and Comp could prove technically significant if major averages backslide in the coming days. But on a standalone basis, Monday was another victory for the bulls, albeit a relatively modest one.
Technology stocks continue to outperform, which may be neither fundamentally supported or prudent long-term money management, but which keeps traders pleased. Echoing the Comp's relative strength,
was the Dow's biggest positive influence, while the Philadelphia Stock Exchange Semiconductor Index rallied 3.2%, to 374.31, its best close since July 17.
Among chip movers,
rose 4.4% after merely saying it could achieve its prior revenue guidance for its fiscal second quarter, while
Advanced Micro Devices
jumped 15.9% after
, up 1.6%, said it was raising flash-memory prices. Chip-equipment names such as
also continued to exhibit strength.
jumped 21.9% on
takeover rumors. The Nasdaq Telecom Index rose 1.3%.
Trading activity was particularly solid, given it's the Monday of a holiday-shortened week. Over 1.5 billion shares traded on the
New York Stock Exchange
, 5.2% above the three-month daily average, according to
, and nearly 1.7 billion were exchanged in Nasdaq activity. Advancing stocks bested declining issues by 18 to 13 in Big Board trading and 20 to 13 in over-the-counter activity.
Early on, stocks got a boost after the National Association of Realtors reported existing-home sales rose 6.1% in October to a better-than-expected annual rate of 5.77 million units. (The housing data gave the dollar a boost; the U.S. Dollar Index rallied 0.45, to 106.57. The greenback also was aided by expectations that Tuesday's preliminary third-quarter GDP report will be revised upward to 3.8% growth from the 3.1% advance report.)
But stocks proxies faltered midmorning with HMOs among the big drags on the S&P 500. Following a downgrade from SG Cowen,
Wellpoint Health Network
dumped 10.9% and
was lower by 2.8%.
Offsetting those declines were -- in addition to the aforementioned tech names -- gains for big-cap pharmaceuticals such as
Early Monday, there's a lot of talk about traders "not wanting to chase" the rally and about the market being "tired" (or "wildly overextended" for the hard-core bears). The afternoon advance could have stemmed from traders' awareness/anticipation that from 1952 to 1987, the Wednesday before and the Friday after Thanksgiving were, combined, positive for the Dow every year save two (1964 and 1965), according to
The Stock Trader's Almanac
. Since 1987, however, those days have been positive only half the time, although the track record improves if the Monday following Thanksgiving is also included.
This year, I suspect most money managers and traders would be thankful if the market's trend is merely flat this week, given the big run-p since the Oct. 9 lows.
Ahead of the Feast, Food for Thought
Which brings us back to a scenario raised here
Friday, when I suggested the market could stay "mainly in rally mode until year-end, at least, the potential for short-term pullbacks notwithstanding."
That comment generated a lot of emails from readers who, in summary, observed that the least-expected scenario right now is for the market to suffer a sharp year-end selloff, increasing chances of such an occurrence.
"I am in the sooner-rather-than-later camp as regards the end of this rally," emailed one money manager, who requested anonymity. "The reason is that everyone is aware of the end-of-the-year
beta trade, and guys are now starting to buzz about when it will end."
By "beta-trade," the source referred to fund managers' desire for higher volatility stocks, and said February-March is the time frame for the rally's end most currently being discussed. "But I sense that the more we talk about it, the more we move this day forward," he commented. "I just can't see how far forward. At least not yet."
He, and other skeptics, may very well prove correct. But gauging sentiment is tricky, and sometimes we all get "too cute" with it. That is, if "everybody" gets near-term bearish because they think "everybody else" is wildly bullish, then sentiment -- which is often a contrarian indicator -- really isn't so optimistic after all.
Notably, few, if any, of the contributors at
were terribly bullish about stocks in their Monday morning offerings. Over at
, Seabreeze Partners' Doug Kass wrote: "My view remains that we are making a relatively important top in the markets."
Just something to chew on.
Secondarily, I wrote Friday that the "inevitable correction" from the post-Oct. 9 rally will "most likely occur by springtime," which really got some readers' dander up. Many interpreted this comment to mean I think the market could continue rallying unabated until April showers bring May flowers, which was not my point.
Rather, I was extrapolating the comparisons between the current rally and the one which began in late September 2001. That move, you'll recall, peaked on Dec. 5, 2001, with the S&P closing at 1170.35. Thereafter, the index went sideways, revisiting and marginally exceeding that peak level in early January and again in late March, after which the market started sliding, with the harsh selloff beginning in mid-May.
Point being, if the comparisons so many market players are making between the post-Oct. 9 and post-September 2001 rallies are accurate, the steep correction won't occur before springtime. That's a big "if", of course, but I hope that clears up any confusion about the point I was trying to make.
Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to
Aaron L. Task.