Intraday Market Notes & Observations

2:10 pm ET: Intraday support/resistance:
SPX 1823/1832
DTX 728.6/732.8
DJIA 16225/16345
Nasdaq 4127.5/4152.5
RUT 1151/1158.8
VIX 12.95/13.55 (bullish)
Trin range: 0.6 - 0.85 (bullish)
Average VWAPs: +63/-52 (sector rotation and/or end of year rebalancing)

Market Highlights: Sleigh bells ring, are you listenin'? In the markets, the Dow is glistenin'...and so are the other major averages. Talk about getting an early Christmas present! Today's pop on the opening bell boosted all of the major averages to all time highs (excepting the S&P 500). Not only has Santa come to town but he's brought his entire entourage. Continued leadership in the Transports (DTX) combined with bullish internals point to a continued rally, at least through the end of this week. However, elevated VWAPs on both the positive and negative side are showing indications of tax selling and year-end rebalancing, a scenario that generally continues through the last trading day of the year.

Nearly all sectors were in the green today lead by Homebuilders (XHB), Technology (XLK), Financials (XLF), and Regional Banks (KRE, IAT) which all hit new yearly highs. Leadership by these groups is a very good sign for a bullish continuation. Also joining the New Yearly High club were IT (VGT), Biotechs (FBT, BBH, IBB), IPOs (IPO--a fairly new etf), Semis (SOXX), Shipping (SEA) and Aerospace & Defense (PPA).

Much of this bullishness seems to be due to a renewed belief that the global economic recovery is back on track--a belief possibly related in part to the change in the Fed's bond buying program as well as incrementally better economic figures both here and in other developed nations (Europe and Japan especially). This would explain the leadership seen in the banks, financials, tech, and marine shipping--all industries that stand to benefit from a global recovery.

Trade Idea: Jumping on the (Volks) Wagon
The Germany etf (EWG, $31) continues to hit new highs even after rising more than 60% from its July 2012 low of $19. Its top ten holdings are all high quality companies and include Siemens (SMAWF), BASF (BASFY), Allianz (ALIZF), SAP (SAP), Deutsche Bank (DB), Deutsche Telekom (DTEGY), Bayer (BAYRY), Daimler (DDAIY), and Volkswagon. All of these trade as ADRs in the US under the stock symbols mentioned. Of the bunch, the two auto makers stand out for three reasons: 1. They both have just broken to new yearly highs (bullish) 2. Their P/E's are relatively modest compared with the others (Daimler's is 9 and Volkswagon's is 6) 3. They both pay a dividend (2.5% for Daimler and 1.3% for Volkswagon). If you're looking for some international diversification, these two stocks would be a good place to start.


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