Monday, December 13, 2010

Weekly View Assessment of The Trend

Back from some fine Skiing in the mountains.Long position from 1088 is now flat.Thank you to all Subscribers for your emails.

Looking at the markets:

From a technical perspective, we are in as real a bull market as it gets. The S&P 500 made a textbook bounce off of the 50 DMA support and 1,175 support level. We should get a nice run up into the end of the year.

There are some technical concerns. The percentage of NYSE stocks above their 50 DMA is at 69.64% which is below it's 50 DMA and well below percentage seen in the last bullish run. From September 9 until the recent pullback we saw numbers above 70% and usually aboe 80%. On 11/5 it was at 88%. The number of new 52 week highs is only 195 (it was 541 on 11/4). Despite the rally, the number of new lows is expanding and is at levels common during the August bottom. The rally is getting narrower as it goes higher. The Retail Sector ETF is displaying poor performance in the entire sector. This is the time of year for retailers to shine but they can't. If the retailers can't rally and the Financial Sector stops it's rally, then I think that the rally will likely end.
From a strategic and fundamental perspective there are various concerns. There are not enough concerns to outweigh the technical picture but enough to keep me from backing up the truck and contiune the long Bias. You have probably heard the endless bearish arguments on TV and the Internet so I won't re-hash it all in detail here.
One recent and popular argument is that the retail investor may be returning to the market and they will bring hundreds of billions of dollars with them. This could be the case but it is a slow process that is not important to us as traders. Last month retail investors removed only 500 million from mutual funds, the lowest in years.
Prior months saw removals of 15 billion and up from these funds. If removal of 15+ billion every month for a couple of years couldn't stop the biggest rally in history then I would count them out as a major factor, and at +/- 1 billion their impact is insignificant.

What I want to see in a rally is an expansion of the stocks making new highs, more stocks over their 50 DMA, and growing interest in stocks that will do better in the future but are not doing so well now.

On Tuesday we get the November retail sales report and consensus is at a gain of .7%. If we get a good number then the rally should be safe. Industrial Production is on Wednesday but expectations are low and it could be considered old news so that shouldn't be a problem.

If any correction is going to take palce it will probably be before FED Day.

Monday morning trading began on a positive note as investors learned that China had refrained on the weekend from raising its benchmark interest rate to stem inflation. This inaction in regards to Chinese monetary policy sparked a rise on many Asian markets, and the US equity market followed suit early on.

No economic reports were scheduled for release today. Tomorrow, however, should see a flurry of activity: The US Senate is expected to vote on the (extension of the Bush the alcoholic) tax cuts; the US government will release PPI, core PPI, retail sales, retail sales ex-auto, and business inventories data; the Federal Reserve will make its latest decision on interest rates.

The US dollar was weak all day today. The passage of the tax cuts would accelerate US deficits even more and could lead to the US credit rating (currently AAA) being placed on negative outlook in the future.But of course the Republicans never discloused to the public this critical risk, because all they care is to satisfy their rich contituents.  While euro zone debt problems could boost the dollar against the euro, the US deficit issues could put pressure on the greenback.

With the holidays approaching, overall volume output is dwindling. Less than one billion shares were traded on the NYSE today.

No comments:

Post a Comment