DOW JONES INDUSTRIAL AVERAGE:

The Dow Jones Industrial Average had slipped below the 13,000 mark yesterday on the back of these fiscal cliff issues prevailing in the markets, but on Monday news that the US congress had reached a deal to avoid the fiscal cliff and a voting on the same was set at midnight ,sparked a sharp rally in the Dow. The Dow Jones Industrial Average surged 166 points to close at 13,104 levels.

The good news on the Fiscal cliff front could lead to a further rally in the Dow on Wednesday, but later in the week attention should shift to the economic data releases like the ISM Manufacturing Data, Construction spending on Wednesday, FOMC minutes and jobless claims on Thursday, followed by the major US unemployment report on Friday.

January is also the month of 3rd Quarter earnings season and the market will be focused on how the earnings perform in the latter half of January. Most analysts feel that this quarter will make many companies to break their important resistance levels and go higher.

Markets will be closed on Tuesday on account of New Year’s holiday. Wall Street resumes trading on Wednesday. Markets are expected to be volatile and completely focused on the Fiscal Cliff deal, economic data releases and earnings reports.

Technical Analysis:

The Dow Jones Industrial Average is now trading in a tight range of 12,880 and 13,200. January should see a break out of this range. If the Dow break to the upside the index could surge above 13,500 to test the 52 week highs. A downside break could lead to the index falling up to 12,500 which is a support area.

The index is also testing the 200 day moving average and a failure to move above this average strongly could signal the start of a bear market in stocks and the United States indices. As of now, we can say that the market is poised for a good move on the up side.

Forecast:

The announcement of the fiscal cliff deal has sparked a sharp rally in the dow, and this rally could be extended for a few more days. Later the attention will shift to the economic data releases with the December employment report being the major trigger for stocks.

Later in January earnings reports will dominate the markets. Earnings are expected to be slightly weak and could derail the rally in the Dow.

Stocks to watch out for:

Herba life Ltd. (HLF) is in the news today and the stock was up more than 12% on analyst upgrade of its stock price. Most analysts feel that the stock is under valued and the stock will see a good movement on the up side in this fiscal year.

Cliffs Natural resources (CLF) were up more than 7% on consensus that the stock is oversold. This stock is falling hard on news that many brokerage houses are downgrading the stock citing bad earnings in the next quarter.

Among the losers were Watson Pharmaceuticals which dropped more than 3% on heavy volume and Cal Maine Food which dropped more than 7%.

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Category: Finances
Keywords: Dow Jones, Fiscal cliff, Gold, Brent Oil