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January 06, 2018 – Weekend Market Comment

January 6, 2018 – Stocks rose on Friday, capping off a strong start to the new year, as Wall Street shook off jobs data that missed expectations.

The Dow Jones industrial average advanced 220.74 points to close at 25,295.87. The S&P 500 climbed 0.7 percent and finished at 2,743.15, with tech stocks rising 1.2 percent. The NASDAQ composite gained 0.8 percent to 7,136.56 as Alphabet and Amazon shares hit record highs. The major indexes also reached all-time highs.

The Dow and NASDAQ enjoyed their best start to a year since 2006, notching their biggest four-day gain to kick off a year since then.

Here is what our charts say:

CLICK HERE: To see the 100 and 200 series charts

101 Bull Bear
Bull market (dark green over red)  the dark green 50 day average is in a rising uptrend. Notice the second window, could this be a long term trend change? BULLISH Bull market -- expect bullish outcomes.
103 NYSE High Low Market Forces
Breadth lines up! BULLISH

105 Non Farm Payroll
Lots of jobs! But beware this is lagging indicator. The smart money is gone before this turns down.BULLISH

107 Industrial Production
Strong industrial production. Trump Bump.  BULLISH

115 Renko
203 OBV
OBV (red line) is with the market. BULLISH
207 VIX
Steady down

209 VIX Evaluator
Looking perfect

211 S&P500 over 50 day
Now about 89% of stocks are above their 50 day MA, above last week when it was 75%. BULLISH

213 Green Arrow
Looks very strong BULLISH

301 NASDAQ Summation
NASDAQ breadth is bouncing up! Expect a strong rebound in QQQ and technology stocks.
303 Aggressive Defensive
Very aggressive. BULLISH

305 Consumer Bonds vs Equities
Bonds fall consumer rise.  BULLISH
307 Bond Direction
Long term bonds rise slightly.
309 Sectors
Defencive and utilities fall,  consumer is a power house. BULLISH

311 Nations
Canada trips, everyone else does well. 

313 Major sectors
China and emerging rule.

! = Pay attention this chart is important this week.

What I Find Interesting
Some believe that stocks should be priced according to earnings. The so called PE ratio is a measure of value. This chart has a black line showing the current value of the S & P 500, the blue line is where the market would be now if the stocks were trading at a PE of 15 (considered fair value) but right now we are way over at a PE of over 25. Historically this is not sustainable -- as you can see in 1999 when the market had "Irrational Exuberance", followed by a 3 year correction.

The Story of How One Man Found the Flaw
This story on the  Reuters web site shows how 31 year old Daniel Gruss single handedly found the flaw in the Intel chip set that set off all the panic this week. 

The flaw would enable a hacker to access secret passwords or photos from desktops, laptops, cloud servers or smart phones.

What's in Your Wallet?
The Visual Capitalitst posted another set of stunning charts this week showing how much of the population has money and where they live. Including a globe view of the wealthy.

What Works Now
Murder and Mayhem
Well if there is one thing the USA is good at, it is creating evil machines that efficiently kill. This week I noticed defence contractor FLIR systems who make those nifty laser guided systems. These can bring a missile with in inches of where it can cause maximum lethal damage.  (Ticker:FLIR)

Oil Price
The Price of Oil is recovering... as it often does under a Republican Presidency. That often boosts the Canadian markets and the "Northern Peso", the Canadian dollar.

Rotating Nations
If you want to put a segment of your funds outside of US lets look at some top performing nation based ETFs. 

Here are my picks for January hold until month end. 
50% FXI China
35% EWY South Korea
15% NORW Norway

What I Think
I think we are in a cyclical bull market (since February 2016) within a near record long, secular bull market (since early-2009), and neither show signs of abating.

Investors are feeling invincible. Everyone (including your grandma) is getting long the market. Look at my indicators above, nothing but BULLISH. In fact 2017 is the first year I ever recall, (for the S&P500) where the 20 day moving average was above the 50 day average all year.  That's a bull market in any ones books. The only worry is that things are too good??? A blow off top can go on a long time so I would not go playing contrarian investor this week. Sure evaluations (as I said above about PE ratios) are off the scale, stocks are fully priced. But who can say no to 2% increase if it happens next week? 

Lets face it, we are in the investing equivalent of a night club and the DJ is setting off fireworks. Enjoy the show -- but keep one eye on the fire exit. 

You can learn more about my indicators by visiting the CME4PIF school by clicking here.

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