The Christmas selling season is in full swing with sales and discounts appearing everywhere. The Grinch is in charge this year so unless you are a child–expect to collect some coal in your Christmas stocking. The good news is that perhaps you can burn that coal.
As to the markets, confusion and chaos remains on the front burner. Now that the Presidential election is finished the marketeers will return their attention to the problems in the economy and the markets. It appears that the lines of liquidity are getting better and that cash is again sloshing around in the system. Lending some of that cash out remains a problem. We really can’t blame the banks for being careful with their cash after all; they really were hurt by not being so careful.
Mr. Market is manic…. Logic seems to have taken a vacation and irrational behavior is the rule. The S&P 500 enjoyed an Election Day rally and a victory two day sell off. The economy became the center piece of the market’s attention and will, no doubt, continue to be of concern. If you are looking for investment opportunities, look to what you use on a daily basis. Look to those companies that supply products or services that you can not or will not live without. We have to eat and we need to buy paper products and we need to use utilities to heat our homes. We drive–less now than before, but we don’t need to shop except where children are concerned. Are we going to buy a new car or a new computer anytime soon, probably not unless we absolutely have to. Are we going to buy a new wardrobe to wear to collect unemployment checks, probably not. Will we buy our children clothes, sure, maybe at a thrift shop and yes, the children will always have Christmas, on a budget but Christmas nonetheless.
Wal-Mart, Target, Kohl, Costco, are all going to make less money but will make money even with an economic slowdown. Neiman Marcus, Nordstrom, Tiffany, Saks Fifth Avenue, Whole foods etc are all in for a world of pain. We continue to advise that if you buy stocks try to focus on stocks that pay a dividend, sell covered calls on those securities and buy the puts. Yes it is three trades but there are discounters out there that will make the investment affordable.
Monday: Bond market closes early in advance of the Veterans Day Holiday.
Wednesday: Federal Reserve Vice Chairman Kohn speaks.
Thursday: September’s international trade is released at 8:30.
Friday: October import prices are released at 8:30, October retail sales are released at 8:30, November University of Michigan Sentiment index is released at between 9:45 and 10:00, September business inventories are released at 10:00, and Federal Reserve Chairman Bernanke speaks.
The US Dollar Index is trapped in a range between 86.94 and 84.55. Should we trade above 87.40 we will move quickly to the recent highs and will remove those highs. On the other hand, should we trade below 84.55; we will drop to 83.125 and 82.650. The downtrend line is at 86.94. For this market to challenge the recent highs, we need to close over that downtrend line. The 5-period moving average is at 86.079. The top of the Bollinger band is at 88.633 and the lower edge is seen at 81.307. The stochastic indicator is issuing a sell-signal on the daily chart, however; the RSI and our own indicator are both going sideways issuing nothing of value. The Thomas DeMark Expert
indicator is issuing a continued buy-signal approaching overbought levels. The weekly chart is overbought with all indicators sitting at overbought levels not indicating anything. The doji-like candle seen on the weekly chart warns that we could see a retreat in the US Dollar index in the near future.
The uptrend line for the euro is at 125.99. The 5-day moving average is at 127.81. The top of the Bollinger band is at 137.17 and the lower edge is seen at 123.17. We have a fresh buy-signal issued by the stochastic indicator. The other indicators are all going sideways near neutral levels. It would come as no surprise to see the euro trading at 138 +/- in the near future. The weekly chart shows an oversold market tilting slightly to the upside. We remain below the Ichimuko Clouds for the daily and the weekly time-frames and slightly above the clouds for the monthly time-frame.
The S&P 500 has become totally neurotic with wide enough swings to cause nausea for most traders. The volume has not been as robust as usual perhaps because of these wild daily gyrations. We had an inside day in the Friday session with most of the upside coming near the close of the market. The stochastic indicator, our own indicator and the RSI are all issuing a buy-signal from the slightly positive side of neutral. The Thomas DeMark Expert indicator is issuing a continued sell-signal. The 5-day moving average is at 954.30. The top of the Bollinger band is at 1029.51 and the lower edge is seen at 848.79. This market is a real trend following market. As the market rallies
we can actually see the buyers following it up trying to catch the rally but as the market falls, we see the same crowd turn bearish pressing their positions. We are below the Ichimuko Clouds for the daily, weekly and monthly time-frame. We need to watch the Thursday low of 897. If long, use that number as a sell-stop. The weekly chart does not look positive. The monthly chart looks a little better and is quite oversold.
The NASDAQ 100 continues to trade below the Ichimuko Clouds, on the daily and weekly time-frame, we are in the clouds on the monthly time-frame. The stochastic indicator is issuing a buy-signal from the positive side of neutral. Our own indicator will issue a buy-signal in the Monday session, so long as it is a positive session. The RSI is bending higher, only the Thomas DeMark Expert indicator is issuing a continued sell-signal nearing oversold levels. For the bulls: if this market can trade above 1402.50, we will go considerably higher however; under 1182.50, we have a world of pain, that is unless you are a bear! The 5-period moving average is at1591.76. The top of the Bollinger band is at 2324.14 and the lower edge is seen at 1410.54. The weekly chart looks as though we are trying to make a bottom. The indicators on the weekly chart are oversold and pointing lower, even the monthly chart is oversold.
The Russell 2000 left a positive candle on the chart as a result of the Friday session. This small capitalization index did not perform as well as the larger capitalization indices. Yes, it rallied but rather as a follower and not as the leader. In past rallies, this index took the lead and forged ahead of the others. On Friday, this index begrudgingly rallied following the larger capitalization indices. The 5-day moving average is at 521.26. The top of the Bollinger band is at 577.13 and the lower edge is seen at 451.65. We are below the Ichimuko Clouds for the daily chart. We need to hold and stay above 491.50. Should we trade below that number, we will open the door to the recent lows a474.60 and 438.50. On the upside if this market can rally to and above 572.50 we will go back to the middle 600’s!
The Continuous Commodity Index had a very narrow day on Friday. The 5-day moving average is at 373.09. The top of the Bollinger band is at 402.60 and the lower edge is seen at 350.22. We are below the Ichimuko Clouds, on the daily and the weekly charts but above the clouds on the monthly chart. The stochastic indicator is curling to the upside but has not yet issued a buy-signal. Our own indicator is hanging out at neutral. The RSI is going sideways and the Thomas DeMark Expert indicator has a slight negative tilt to it and is sitting at oversold levels. So long as we do not remove the 350.05 low, we will be okay. Should the 350 level fail to hold, we will open the door to much lower levels.
Crude oil continues to look negative on the daily chart. The downtrend has been steady and continuous. Should we trade below 60.18, we will open the door to much lower levels. On the upside, above 62.22 we should see a bounce to 64.26. Above 66.30 we will enjoy a ride to 68.34. The 5-day moving average is at 64.31. The top of the Bollinger band is at 80.71 and the lower edge is seen at 57.382. We are below the Ichimuko clouds on both the weekly and the daily charts. The first barrier on the upside is at 68.04, the second barrier is seen at 85.22.
Gold needs to stay above 734, which is the short-term uptrend line. The 5-day moving average is at 738.58. The top of the Bollinger band is at 855.24 and the lower edge is seen at 677.84. The stochastic indicator is issuing a fresh sell-signal from a neutral level. The RSI is tilting upward. So long as gold stays above 705.50, the bias will be to the upside. Should gold trade below the 705.50 level we will see a flush to the downside taking gold to 664, where some support should be found.
Jeanette Schwarz Young, CFP, CMT
One North End Avenue
New York, New York 10282