November 17 2013 – Honestly I am not very confident writing this comment this week and I am not going to give an firm advise because I am not really sure how this will end. The stock market, which has been melting up most of this record-breaking year, is on the cusp of achieving a troika of major milestones. Dow 16,000 is within easy reach for the first time. The Standard & Poor's 500 is fast approaching 1,800. And the Nasdaq composite is nearing 4,000 for the first time since the dot-com bubble burst in 2000.
But milestones do attract the attention of mom and pop investors, including many who might feel pressured to get in the market after missing out on the gains because they've been on the sidelines. They also put fear in many fund managers. I think in the coming few days we hit those numbers and rest for a while. This is not the time to put new money to work.
Keeping up with the market has been tough. The S&P 500 is up 26.1% in 2013 and notched 36 record closes as of Friday, the most since 1998. The path of least resistance for stocks is up, with continued improvement in the U.S. and global economies. The Federal Reserve's investor-friendly bond-buying program, which stimulates the economy by keeping borrowing costs low, is likely to continue under Janet Yellen I don't think you can deny there's a “Yellen Effect,”
The S&P 500 is trading at 16 times its earnings over the past four quarters, putting valuations in line with historical averages. The market is not cheap. But it's not super overvalued. I think the S&P 500 hits a year-end target of 1,850 — up almost 3% from Friday.
The indicators are at full power, and that makes it clear that we are in a frothy market, increase frenzy often ends badly, but there is no denying we are nearly ready to draw a green arrow. But as you can see off a very funny pattern, the market has been so strong we did not complete a pull back.
All forces are up. Look at the Nasdaq summation index, clearly turning up
The Primary Sell lines shows the pros are still confident buy way more calls than puts.
The NYSE percent over 50 is rebounding but it could just be a blip in part of a big retreat.
So as you can see the party is on, who wants to be left behind? But there is this nagging problem and it is my VIX overconfidence graph, on the one hand the VIX does break into new zones so nothing says this must be the bottom, but look what happened in the past when the VIX hit the high end of 11s it at least means you must be aware.
I said before one sign we need to be sure this bounce was real was U.S. banking is doing well, and it is not. Yes a few big names picked up this week including Citibank and my favorite Bank of New York Mellon. But look at KBR an ETF of small US banks and plot it in relation to the S & P 500 and the trend is clear, banks are weak.
Some of my past picks are still doing very well. Here is Mathanex
and Trip Advisor
If you are convinced the market goes higher from here you might look at Japan is got a rising market and falling currency, that could boost DXJ. It not just schools that have Christmas plays, you might hold M and MHK, KORS for a few weeks. New favorites of mine under consideration are CVLT, HLS, PCLN. but keep your stops tight, it is late in the game to be putting new money to work.
As for me I am still mostly in safe steady pipelines.