The DOW continues in its sideways channel and moved up to the top of that channel this past week on weak volume.  The trend is tired and ready to retrace.  The stochastics has moved back into the overbought area and the index is at the top bollinger band.  I feel that this move is merely end of the year window dressing and we are overdue for a pullback.  If we break down out of the channel, look for 10,100 as the first level of support followed by 9700 – 9800.  The upside resistance appears to be very stout and in my opinion, not likely to be challenged soon.

The SPX closed above the recent channel top but on very unremarkable volume.  We shall see if the index will continue higher, but I feel that any upside move will be short lived as we are due to pullback soon.  The “January Effect”  may allow the small caps and value stocks to shine, but that should not carry beyond the end of January.  I don’t feel that the pullback will be massive, maybe 5 to 10 percent.

The COMPQ convincingly broke to the upside with apparently no signs of indecision.  However, it was not a quality move based upon the lack of participation as measured by volume.  It will be interesting to see if we get follow through into 2010.   My next comments will be coming to in the New Year.  Stay in tune with the market and follow it.  If you go where the market goes, you will prosper in 2010.  Best, Robin

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