Morning Comments. Tuesday 1/2/2011

The S&P 500 rose 0.77% last night. It remains below the 13-Day Moving Average (just). Volume was a little on the low side. To my eye, that's not a particularly convincing effort.

The Nasdaq was also up last night, 0.5%. It's performance was also less than stellar with volume being low. It also remains below the 13-Day Moving Average.

The Russell 2000 (RUT) was of interest last night. It finished up 0.75% - more or less on a par with the S&P 500. For underlying strength in the market, I like to see the RUT do better than the S&P 500. And it was - until the last two hours of trading. At 2.00 p.m. it was well up on the RUT then in the second last hour of trading it sold off heavily. Again, this is not a sign of strength.

Here is an interesting quote from Bespoke Investment Group (BIG):

Since the start of 2010, the S&P 500 has finished the first trading day of the month higher in eleven out of thirteen months (85%). Additionally, the S&P 500 has also risen more than one percent eight out of thirteen times (62%).

In fact, the first trading day of the month has had such a large impact on the equity market recently that if it wasn't for that day, instead of being up 15.3% since the start of 2010, the S&P 500 would only be up 1.4%.

Hmmm, the odds favour an up night tonight in America. So given the stronger market in America last night, we can expect upside in our market today.

If tonight in America is weak - that will be a big negative.

Good luck

Red