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December 24, 2016 – Weekend Market Comment

December 24, 2016 – Welcome to my weekend market comment, an analysis tool I use in my own portfolio decisions, published free to the web every weekend before the New York opening bell. You can read the latest version each week by bookmarking For full details read my disclaimer (link at the bottom of this page).

U.S. equities closed mostly flat on Friday ahead of the Christmas holiday, as the Dow Jones industrial average failed again to reach the psychologically important level of 20,000.

Investors stepped back from a postelection rally boosted by expectations that President-elect Donald Trump's policies would stir up growth and inflation. Optimism had also flooded the market amid possible tax cuts and deregulations. The decline pulled the Dow further away from its psychologically important level of 20,000, while the S&P 500 and the Nasdaq booked their first successive losses in three weeks. The broader market dwindled in recent sessions amid thin volumes ahead of the holiday season in December, while investors also digested a slew of economic data. 

Lets see what our charts say:

101 Bull Bear
Bull market (dark green over red)  the dark green 50 day average is in a firm uptrend.  NOTICE THE SLOPE (second window), we remain in an uptrend, a very long term uptrend.  Bull market -- expect bullish outcomes.
103 NYSE High Low Market Forces
Wow look at this take off. Gone is the weakness from early November. Nothing but strength. 

105 Non Farm Payroll
Lots of jobs! But beware this is lagging indicator. The smart money is gone before this turns down.
107 Industrial Production
Beginning to be disturbing -- manufacturing is lagging.  Could this be the first canary in a coal mine signal?

115 Renko
Market is strong 12 white bricks! You seldom see a run this long, but who knows how far this bull can run. Notice how it is obvious on a Renko chart. SUPER BULLISH!

203 OBV
OBV (red line) is happy. The hedge funds are wading in knee deep. But notice how obvious the sideways market is.Bullish!
207 VIX
Fear is gone... everyone is long. But notice we probably have 2 weeks until a return of fear. For now Bullish

209 VIX Evaluator
Very much bullish. 2016 was a mostly up market years.

211 S&P500 over 50 day
Now about 74% of stocks are above their 50day MA, about even with last week when it was 73%. Bullish.

213 Green Arrow
Only put new money to work when I draw a green arrow. TRIX says green light, could be a green arrow soon.

301 NASDAQ Summation
Nasdaq breadth stalls. CAUTION
303 Aggressive Defensive
Very defensive. Long but in safe choices.

305 Consumer Bonds vs Equities
Bonds bottom. Consumer deflating? Sorta cautionary.

307 Bond Direction
Weakness in bonds indicates overall market caution of current and future rate hikes.

309 Sectors
Small gains in Defensive and Utility stocks. Consumer tanks, not good at Christmas.

311 Nations
Germany and USA are safe-haven bets

313 Major sectors
Canada perks up.. more safe-haven plays and good news from Trump on pipelines.

! = Pay attention this chart is important this week.

What I Find Interesting
Consumers  are Happy
The Index of Consumer Sentiment hit 98.2 in December, the University of Michigan reported on Friday. The figure is up from 93.8 in November's final reading. Economists expected the consumer sentiment index to hit 98 in December's final reading, according to a Thomson Reuters consensus estimate. The surge in confidence following President-elect Donald Trump's surprise election aided in the numbers, the report said. Notice rising confidence and a rising market.

This is a two edged sword, clearly enthusiastic spending consumers are good for the economy - to a point. But also it is a sign of late market and the smart money is often out the door just as Joe average is the most confident. If you buy when there is "blood in the streets" and sell when everyone is sure the market is invincible, of course that is the heart of buy low sell high. 

A thought on Christmas Dinner
I am getting ready for Christmas eve and my thoughts turn to holiday over eating. That uncomfortable feeling of having overeaten is caused by the stomach pressing into surrounding organs - including the liver, diaphragm and lungs. Generally we feel stuffed if we exceed one liter of food -- reaching danger at 4 liters of grub. (a quart is about 4 liters).

Can my stomach burst from over-eating? Sadly, yes. There are cases where the stomach becomes so large that it ruptures from the sheer volume of food within it. One 23-year-old lady had over 2,500ml within her stomach, which caused it to swell so much that it filled the whole of her abdomen, from her ribs to her pelvis. It eventually perforated, necessitating emergency surgery.

Can I die from overeating? Yes, there are a couple of reports of people dying from over-indulging. This is very rare, but it happens. One person died from tearing their oesophagus, the tube that connects the mouth to the stomach and others have actually ruptured their stomach by over-eating.

How Much Can One Eat?
Of course there are ways to pig out beyond Christmas. The most hamburgers eaten in 3 minutes is 12 and was achieved by Takeru Kobayashi (Japan). Mario's Café in Westhoughton, Bolton UK offers the breakfast blow-out for £10.95. The giant fry-up includes ten sausages, ten eggs, ten rashers of bacon, five black puddings, and piles of beans, mushrooms and tomatoes. However you must sign a health disclaimer before ordering as it contains a heart-stopping 5,000 calories - twice the daily amount recommended for an average male.

One of the largest Christmas meals ever consumed American woman in 2010 consume 50 lbs of turkey, 30 lbs of ham, 35 lbs of potatoes, vegetables, and stuffing, which was then washed down with eight pints of gravy and relish and followed by dessert. This meal consisted of 30,000 calories—to put this into context, males and females are recommended to consume 2,500 and 2,000 calories daily, respectively.

If you would rather dine out, the largest Christmas dinner is a 9.6 kg (21.16 lb) festive feast for one that comprised a turkey, carrots, parsnips, broccoli pieces, cauliflower pieces, roast potatoes, “pigs in blankets” and 25 sprouts. Going by the name of the titanic turkey tea, it is free for anyone who can eat it – solo – within 45 min! It was served by Ashley & Louise Gargan at the Duck Inn, in Oakenshaw, Worcestershire, UK, on 24 December 2013.

What Works Now

Since the market is moving sideways the only good plays are the oversold stocks on a bounce.

Beer always sells, although this firm is under pressure form mega merge giant InBev, look at Molson Coors Brewing (Ticker:TAP)

Could not resist, a beer pic from my work on SCTV as a teenager.

As U.S. markets look overbought and if you think in 2017 commodities will rebound look at Brazil (Ticker:EWZ)

Now that's a good investing climate. . . 

The big fear of Hillary Clinton capping drug prices is gone and healthcare is often a safety play. Besides the sector might be oversold. Look at Celgene for its strength of its flagship multiple myeloma drug Revlimid and growth in newer medicines. (Ticker:CELG)

Credit and Debt
With consumer wallet so light this year someone is going to make money when they don't pay. Look at credit giant Dun and Bradstreet.  (ticker:DNB)

What I Think
I think this is a bull market and so you must expect positive outcomes. U.S. markets this week had a short-term bearish tone to it, but there were certainly no price breakdowns and no reason to believe it was anything other than a bout of profit taking during a continuing bull market advance.  All of our major indices were lower, but volume on the S&P 500 was a holiday-induced below average level. 

Sure the market has run along way that is why it is consolidating (going sideways) and sure this is one of the longest bull runs in history. It been a long run and the market is tired. But until I see a major problem I am long but cautious.

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