Five days until Christmas and snow is everywhere. Point and click your way to Christmas. Who benefits, well FEDEX, UPS and of course, the US Mail. Why, because we can’t get there to shop and we can’t get there to send so, the carriers should enjoy the benefit of bad weather as we move on to the end of the shopping season. Four days left for the Christmas rally to appear, four days and counting. We see the markets coiling and very range-bound as portfolio managers pray that the markets remain where they are until the end of the year. They have they stops in place but hope for the best counting down the 10 days to New Years with their pepcaid and antacids on hand.
The next big event will be the Christmas returns and the count on the approximate of gift cards lost never to be redeemed. Gift cards have always had a place in our shopping, but more and more, stores count on many of the cards not being redeemed although, this year won’t probably show an increase as consumers use all available cash for bills. That thought reminds us that spending this Christmas will likely be less than usual as money is being funnel led into “bills to be paid” stockings hung by fire hoping that Santa drops a little in the bucket for the household.
Looking for the January effect stocks? Well, look no further than the Russell 2000 for a buffet of offerings. This index, a major under performer for December, should be the beneficiary of choice in January.
We are so glad to hear that the recession has ended and thus, we are guessing that means that we are in expansion? The only problem is, that we, and many other folks like us, don’t feel relief that one should feel at the end of a recession. Many of us feel that a jobless end to a recession is not an end at all. Until we feel that we can breathe financially, the recession will not be over on Main Street, perhaps in D.C. where our fearless leaders are out of touch, but certainly not here on Main Street USA. Larry Summers said last week: “Everybody agrees the recession is over…We’ve walked back from the brink.” Then why do average Americans have so much trouble paying their bills? Why are so many houses in foreclosure? Why are the welfare recipients growing daily, why are there so many food stamp recipients why are people hurting? Why did banks get all the TARP money and why is the little American that elected congress to represent the public voice, selling us down the river?
Tuesday: 3rd quarter GDP is released at 8:30, and November existing homes sales are released at 10:00. Wednesday: November personal income and spending is released at 8:30, December Michigan Sentiment is released at 9:45 to 10:00 and November equipment leasing and financing index is released at 10:00. Thursday: November durable goods shipments and orders are released at 8:30 and mutual fund sales and redemptions for November are released. Friday: Merry Christmas!
The US Dollar Index has been on a tear since its low of November 26th. We have seen this index cling to the upper edge of the widening Bollinger band. We are approaching levels where, some resistance will be seen. Levels of 78.76, 78.90 and 79.01 will offer some resistance to the continued rise in the US Dollar index. The 5-day moving average is at 76.93. The top of the Bollinger band is seen at 78.17 and the lower edge is seen at 73.56. Clearly, the US Dollar index cannot stay above the upper edge of the Bollinger band without seeing a further increase in volatility. We would expect to see things calm down in the last few days of the trading year. The stochastic indicator and the RSI are and have been overbought, neither is signaling a downturn. Our own indicator is warning of a sell-signal in the next session. The Thomas DeMark Expert indicator is flat going nowhere. We are below the Ichimoku Clouds for the weekly and the monthly time-frames but we are above the clouds for the daily time frame. We are looking at a “pole” formation and that warns us that the uptrend will give way to either a correction or a consolidation.
If you ever want to see a range-bound market, go no further than the S&P 500. This market has been trading in a range since November 10th and shows no indication of moving out of that range. The longer we remain in that range the greater the move will be when we break out of that range. Unfortunately, the range doesn’t tell us which way the breakout will be. We do not expect to see anything important before the New Year, as trading desks are evacuated for the Christmas Holiday. Only the elves remain minding the store. This could be interesting but chances are that we will become even duller as the time to the end of the year progresses. The 5-day moving average is at 1102.77. The top of the Bollinger band is at 1117.23 and the lower edge is seen at 1086.36. The Bollinger bands are remaining very narrow illustrating to all the lack of any trading while we count out the days to the end of the year. The stochastic indicator is curling to the upside and looks as though it will issue a buy-signal within a day or two. Our own indicator is duplicating that action. The RSI is really flat at neutral and the Thomas DeMark Expert indicator is pointing to lower levels with plenty of room to the downside. We are above the Ichimoku Clouds for the daily and the weekly time-frame but are below the clouds for the monthly time-frame.
The NASDAQ 100 offers another view of a range-bound market. We are above the Ichimoku Clouds for the daily and weekly time-frame, but in the clouds for the monthly time-frame. The stochastic indicator and our own indicator are both issuing a buy-signal at overbought levels. The Thomas DeMark Expert indicator is pointing lower and the RSI is pointing higher. The 5-day moving average is at 1795.27. The top of the Bollinger band is at 1817.73 and the lower edge is seen at 1757.14. The upper edge of the trading range is at 1813.75 and the lower edge is at 1750 although we had a downside spike on November 27 which showed a low print of 1722.25. If we break either above or below the range, expect to see some quick moves. We actually believe that we will be range bound until Christmas and then maybe some upside bets looking for an early January effect.
The Russell 2000 looks a bit less range-bound than do the other indices. It really looks as though the Russell 2000 could try to break to the upside. The uptrend line is at 601.16. We see that 610.50 will cause an upside stall with further resistance at 612.20. Above that level, we have clear sailing until 615.80, 622.30 and 624.50. Above 624.50, we should move quickly to the upside as we melt up. We are above the Ichimoku Clouds for both the daily and the weekly time-frame. The 5-day moving average is at 603.76. The top of the Bollinger band is at 616.24 and the lower edge is seen at 577.12. The stochastic indicator, our own indicator and the RSI are all pointing to higher levels from overbought levels. The Thomas DeMark Expert indicator is issuing a solid sell-signal.
Crude oil seems to have bottomed on December 14 when it traded down to 68.59. Both the US Dollar Index and crude oil rallied this past week. We gather from that behavior that there is reason to believe that crude oil will go higher in the coming months. We remain below the Ichimoku Clouds for the daily time-frame and in the clouds for the weekly time-frame. The weekly chart shows us that crude oil has been trending lower. Crude oil needs to trade above 78.05 to reverse the downtrend seen on the weekly chart. We remain bullish so long as crude doesn’t close below 65.
How does 954 sound for gold? Well then, how about 1063? Both of these numbers are good support numbers for gold. Actually, 1063 should be a good number for all those looking to get long in a hurry. We believe that you will actually see gold below 1000 per ounce and that there will be excellent support for gold at 982-84. Both the RSI and the stochastic indicator are oversold and issuing a buy-signal. We are above the Ichimoku clouds for the daily, weekly and monthly time-frames. The 5-day moving average is at 1123. The top of the Bollinger band is at 1224.70 and the lower edge is seen at 1088.58. Keep your powder dry, too many gold bulls at the moment. We believe a better opportunity will present itself. If you must go long, look at silver.