You can really tell the holiday break is approaching. Volume was pretty anemic on Monday, and withered even more on Tuesday. There's almost not enough market activity to analyze... almost. We've got just enough to make it worth a look, which we'll do right after a quick look at the wave of economic data we had dumped in our laps today. You may recall last week we heard November's housing starts and building permits. They weren't great. They weren't bad, per se - they just fell a little from October's pace. But, we'd certainly like to see forward progress all the time, and we haven't seen a lot of major forward progress from either in a long while. Well, the real estate picture didn't get any prettier this week. Yesterday morning we learned the nation's pace of existing home sales fell from 5.25 million in October to 4.93 million last month. This morning we learned the pace of new home sales in the United States slumped to 438,000 in November, down from 445,000 a month earlier. Take a look. We're not as worried about existing home sales, despite last month's drop - the broad uptrend in existing home sales is still intact. The new home sales pace seems to have stagnated though, and that doesn't bode particularly well for construction names. We also got an update on the FHFA Housing Price Index for October today. It was up 0.6%. That just leaves the Case-Shiller Index to round it this month's look at the real estate market, which is due sometime next week. Though it pulled back just a bit in September, it's still in a broad uptrend... as is the FHFA Home Price Index. Just bear in mind both of these data sets are well over a month old by the time we hear them. You also likely know by now Q3's GDP growth rate was recalculated to be 5.0%, up from prior estimates of 3.9%. There's no getting around it - that's a great number. I don't know how we got it, considering construction has been lethargic and gasoline prices didn't become uber-cheap until calendar Q4. Numbers don't lie though. Here's the GDP rate trend along with the personal income and personal spending trends. The personal income and personal spending plots you see on our chart are the raw data of both rather than the percent-change figures you hear about every month. I just think this longer-term look at the actual data tells you so much more than one month's change can. Either way, it doesn't take long to realize that the big growth in the GDP total - while likely a little overblown for Q3 - can't come as a complete surprise. People ARE (collectively) making a record amount of money in the United States, and they're spending a record amount of it too. I still have doubts about the sustainability of this trend at its current pace, but we have to assume the trend is to remain in place until it clearly isn't. The only other economic news on Tuesday was the final reading for the Michigan Sentiment Index for December. I'm not going to chart it for you because we've pretty much charted you to death today already. We'll just let you know it was good, extending a broad uptrend in consumer optimism. The final score for this month was 93.6, up from November's 88.8. OK, ready to talk about this market? Great. All Eyes on the Russell 2000 Like we mentioned above, it's easy to see folks are walking away from their trading activity, getting an early start on the Christmas break. And yet, we've still got plenty to talk about, even if it's bigger-picture stuff. In Monday's newsletter we made a point of inviting all of you to send us your thoughts and questions, and we immediately got a handful. We've only got time and room to answer one of them today, however, so we picked the most relevant and time-sensitive one. Wayne writes: "Do you think the Russell 2000 will break out to new highs in the very near term. Personally, I do NOT. I think the Russell 2000 has been setting a top for a long time and will lead the rest of the market down. What are the chances I could be right? And then after leading the market down, the Russell 2000 will lead the market up to new highs after a significant correction." You know, it's kind of interesting (though not likely a coincidence) that John Monroe over at the Elite Opportunity made the Russell 2000 the bulk of his focus in today's newsletter. I'll show you a piece of what he said, but first, let's make sure we're all on the same page by starting with a look at the Russell 2000 chart. As you'll see in the weekly timeframe, the Russell 2000 recovered well from October's stumble, and is now approaching a major ceiling at 1214. To answer Wayne's question, I don't know. Without knowing the context of marketwide high valuations, the current shape of the Russell 2000's chart suggests we're in the midst of a consolidation phase within a longer-term uptrend. The trigger for the renewal of the uptrend is a break above 1214, which is just 14 points (1.1%) away. And, after a year's worth of consolidation, you have to think the brewing breakout is ready to roll. The problem we can't escape is wickedly high valuations, which we've talked about at length more than once in recent newsletters. I'll be the first to say traders have the uncanny ability to ignore information that doesn't jive with their expectations, which in this case means the market will keep rallying as long as traders choose to ignore frothy valuations. And, with a GDP growth rate of 5.0% for Q3, the market has even more reason to ignore all those high P/E ratios. Translation: I wouldn't dismiss a move above 1214 as the beginning of a breakout. Until we see it happen though, I think stocks are a coin toss. Like you said, this may all just be a big setup for a triple-top and subsequent move back to the lower edge of the recent range. I'm not going to force myself to put money on the table here. As for what John Monroe had to say about it, he wrote: "The only slightly bearish possibility at this point is if the Russell fails miserably on a test of a new high, it may suggest it wants to remain in a consolidation phase, and possibly be an early clue the rest of the major indices could finally be entering into a range bound scenario. However, if that ends up being the case, there will be some nice tradable opportunities both to the long and short side of these markets, depending of course on where they are within that range." That's not the only thing he said in today's Elite Opportunity newsletter, but you can get a taste for what he's seeing with the Russell 2000. He sees the trading range too, and isn't willing to make a huge bet on a breakout just yet either. A breakout is on his mental radar though. What's interesting about today's action is how the S&P 500 moved above its resistance and reached new record highs, but the NASDAQ didn't. Given that the Russell 2000 and the NASDAQ Composite should lead the market, their inability to move higher here implies there's still a nagging overhang working against stocks. My guess is, with the S&P 500 clearing the resistance at 2076, we should have enough gas in the tank to make a Santa Claus rally... a rally that should push the S&P 500 up to its upper Bollinger band near 2114, and force the Russell 2000 to test or even slightly exceed 1214. Past that, I've got a bearish feeling about things. We'll have to cross that bridge when we come to it though. One thing I can't stress enough (and as John also made a point of saying) - we may actually need to test new highs to spark a pullback. So, don't get too giddy when and if all the indices reach into new high territory. That's when we'll be most vulnerable to a bear attack. How the market responds to new highs will be a big clue as to our future. It should all come to a head shortly after the new year arrives. In other words, I'm near-term bullish, seeing the Santa Claus rally as ready to unfurl. I'm not going to be as optimistic by the early part of January though, even though things are apt to look relatively bullish (like hitting new highs) then. It may be the most important fork in the road stocks have seen in a long time. For what it's worth, we only scratched the surface with our small cap analysis in today's newsletter. If you want all of the good stuff, the Elite Opportunity tool a holistic look at the small cap space in today's newsletter, and where they might fit into the picture in 2015. This is no small matter, because as you can see on our comparison chart below, the Russell 2000 (RUT) really lagged the NASDAQ and the S&P 500 this year. Something's got to give one way or another soon. If you truly want to know how and where to invest in 2015, today's edition of the Elite Opportunity was a real eye-opener. Here's how to get more out of the market by becoming an EO member, or cut and paste this link: https://www.smallcapnetwork.com/pages/SCNEO/v1/ What You Missed You know the drill by now... if you're not visiting the website every day then you're missing out on some great commentary and actionable trading ideas. Since this is the giving time of year though, I'm going to skip the sermon today and just give you the links to the must-read commentaries we've seem so far this otherwise-slow week. First (though not necessarily foremost), James Brumley actually crunched the numbers at stake for Gilead Sciences (GILD) now that its hepatitis C drug will no longer be available through Express Scripts (ESRX). As it turns out, the Express Scripts exclusivity deal with AbbVie (ABBV) may not yield disastrous results after all, IF Gilead plays its cards right from here. If you have kids in your family, then odds are good you've bought at last some toys within the past month; tis the season. Did Hasbro (HAS), Mattel (MAT), and JAKKS Pacific (JAKK) make the most of this year's toy-buying frenzy though? John Udovich answers the question most of us are asking this time of year. We have to give credit where it's due - Bryan Murphy absolutely nailed it, calling for a pullback from Keryx Pharmaceuticals (KERX) yesterday that materialized in spades today. There's still plenty of meat left on the bone though. Here's what Murphy sees wrong with the chart. Finally, if you need more trading ideas than you can glean from the website, here's a little stocking stuffer for you - free stock trading ideas served up to you by e-mail or by a text sent to your smartphone. It may well be the only free thing you can get your hands on this time of year. That's it for today, folks. Talk to you Wednesday.