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December 6, 2014 – Weekend Market Comment

December 6, 2014 – U.S. stocks rose on Friday, lifting the Dow and S&P 500 into uncharted terrain and posting a seventh week of gains, as investors embraced a stronger-than-forecast November payrolls report as backing the view the economy can handle rate hikes by the Federal Reserve in 2015.

We have the pieces of the U.S. economy coming together, with robust jobs growth, falling gas prices giving consumers lots of confidence to spend money, and low interest rates. It's a great holiday gift going into the end of the year. U.S. employers created 321,000 jobs last month, the largest gain since January 2012, and topped the most cheery estimates. The unemployment rate remained unchanged at a six-year low of 5.8 percent, and hourly earnings increased 0.4 percent.

Just look at Non-Farm Payroll it will not be long before the US runs out of cheep labor again.

After a 91-point advance lifted it to a intraday record and within 9 points of the psychological milestone of 18,000, the Dow Jones Industrial Average gained 58.69 points, or 0.3 percent, to 17,958.79, with JPMorgan Chase and Goldman Sachs Group leading blue-chip gains that included 20 of 30 components. Also climbing to a record, the S&P 500 advanced 3.45 points, or 0.2 percent, to 2,075.37, with financials pacing sector gains, as higher interest rates would boost bank earnings, and energy performed most poorly among its 10 major industry groups. The Nasdaq added 11.32 points, or 0.2 percent, to 4,780.56, leaving it down 0.2 percent on the week, it first weekly drop in seven. For every seven shares that fell, eight rose on on the New York Stock Exchange, where nearly 755 million shares traded. Composite volume approached 3.4 billion.

Oil and Commodities 
Dollar-denominated commodities including oil and gold fell, with crude futures for January delivery falling 97 cents, or 1.5 percent, to a five-year low of $65.84 a barrel and gold futures for February dropping $17.30, or 1.4 percent, to $1,190.40 an ounce. 

Say Hasta-la-vista Argentina, Adeus Brazil, Do-Svidaniya Russia, G'day Australia and Take-off-ya-hosers to Canada. The era of living off taking rocks out of the ground is over!

Folks this is no time to play long commodities, oil stocks or anything to do with national economies that rely on commodities as a major export. 

Here is the CRB commodity index . . . ewww!

It’s looking like Monday’s spike in oil prices was little more than a blip. The price of oil fell again on Tuesday after experiencing a brief rebound to start the post-holiday week. Crude oil prices gained as much as roughly 4% yesterday, rebounding from five-year lows, before falling again today. Prices for Brent crude oil are recently down about 2.3%, to $70.83, while West Texas Intermediate (WTI) is down 1.8%, to $67.26. Oil prices are down sharply this year, losing over 30% of their value since hitting a summer peak.

Look at the price of oil folks . . . this is no time to be long oil. 

One person I know was asking about buying up a Canadian Oil company stock after a recent pull back . . . Look at this chart. Even if you did not know the world was swimming in oil . . . does this graph look like a buying opportunity? 

We don't catch falling knives. . .

I have always said the most influential magazine in the world is the Economist and this week's cover story is an important read on why we are going to be swimming in oil for a long time. 

Put simply, global oil supplies are exceeding demand and driving down prices in the process. A major factor has been the explosion in U.S. oil production, which is up to almost 9 million barrels per day and expected to hit the highest levels in four decades next year. Another factor is the struggling economies in Asia and Europe leading to a decrease in oil consumption. China, one of the world’s largest oil consumers, has seen its economic struggles result in its demand for oil being outpaced in Asia by India, a country that has also struggled financially of late. Saudi Arabia also cut the price of its own crude to the U.S. earlier this month, which has further propelled the sell-off. 

Look at the areas in the USA that are fracking right now.

Meanwhile, oil futures were hit especially hard late last week by a decision by the Organization of Petroleum Exporting Countries (OPEC) not to adopt additional measures to tackle oversupply issues. OPEC, the cartel responsible for one-third of global oil production, said it would keep its self-imposed output ceiling at 30 million barrels per day. The announcement subsequently sent already-low oil prices down even further as OPEC’s maintained quotas will do nothing to lower overall oil output to a point that is consistent with global demand for the cartel members’ oil, which the International Energy Agency estimates at just above 29 million barrels per day for next year.

It All Shows Up in the Charts . . .

Bull Bear Lines
We are in a Bull Market as we have been for the last 5 plus years . . .  The worst you could says is we are overbought . . . but that can go on a long time. 

Primary Sell

Well the jobs report bounce caused an up-swing in the primary sell. 

Aggressive Defensive 
It looks like smaller more risky stocks are back in play.

Green Arrow Graph
The Green Arrow Graph looks more positive over just one week ago's graph. Although all you can really say is . . for now it is heading sideways. 

Nasdaq Summation Index
meach not sure yet . . .

Bonds vs Equities
As you can see the jobs report kicked the stuffing out of the rising returns in Bonds and put us squarely in the equities leading camp . . .

That said, you still must read these charts with a dose of common sense. Here is the graph for TLT even though many expect rising interest rates, it has not really been a stampede for the door . . . at least not yet.

NYSE High Low
Well the majority of action on the big board continues to be new highs and so all looks health on the NYSE.

OBV continues to shows that institutional buyers are investing.

S&P500 Over 50 Day
The trend continues as more and more weeks stocks loose appeal. Don't ignore this graph, there is developing weakness in the underlying market. 

The CBOE Volatility Index, a measure of investor uncertainty, fell 4.4 percent to 11.84. Confidence remains high and market crash insurance is is not selling well. Notice CCI is in the brown oversold area.

VIX Evaluator
Well our experimental graph is not falling off with the VIX this tells you the smartest money is not thrilled with this market . . .

What Works Now
Well I told you to be long Germany, and if you followed me in you are very happy this week

Some of our old favorite conservative buys are up nicely like the Bank of New York. For a conservative bank this is amazing. Up over 30% in 2014 when the S&P was only up less than half that.

The consumer is the story this winter. Young girls are still buying $200 a pair UGG boots

Probably end of the Christmas Rush but I hope you enjoyed the ride on Macy's recommended here in early  November.

Don't run out and buy this . . But keep an eye on Cognizant Technologies this firm exports US jobs to India and it with a jobs report this strong they are this might be a great long term play.  Symbol CTSH

Well the market really loved that jobs report, what was falling off last week has mostly recovered. Financials did astonishingly well this week. I would remain long the market, but still conservative because we are overbought. You can reduce your cash positions a little but don't go crazy this is an over bought market. Avoid anything to do with commodities and commodity based economies. I am taking profits in my Canadian holdings. 

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