We got yet another distribution day yesterday on the S&P index to 8. There is no question that it represents institutional selling. We get apprehensive when we get to 6. So, why is the market still in a confirmed uptrend? Well, a couple of those distribution days date back to the end of October and they will cease to count in a few days. You also had the holiday last week which put the volume at such a low number that the next session showed a decline on higher volume. But, that is really a lame situation. So, where are we? Nervous. We do not like what we are seeing on a very, very short term basis. When you throw in today’s jobs report which was unexpectedly better than anyone expected, you get more nervous nellies talking about the Fed’s tapering program. Ostensibly, with the economy doing better than expected, the scuttlebutt is that the new Janet Yellin led Fed will taper sooner rather than later; maybe even at their next meeting this month. We think they will talk about it, but do not think they will pull the trigger. But, all of this kind of stuff leaves the floor traders antsy. What about the Santa Claus effect? Will the remaining corporate earnings report matter? What about locking in your gains for an extraordinarily great year? Yeah, all of that weighs on the market near term. The larger issue is what happens after that. With an improving economy, we believe that pockets of power will emerge. If rates start to rise (and they will) our focus will trend toward the financials. They increase their margins when rates go up. Throw in the fact that the SEC is nearing the end of the fiscal crisis investigations, and we might finally be able to put a pencil on a bank’s worthiness going forward. Several of them trade below book value; so, that is an area of interest. For now, this is not Katy-bar-the-door. This and/or the accompanying information was prepared by or obtained from sources which DFE believes to be reliable but does not guarantee its accuracy. Any opinions expressed or implied herein are not necessarily the same as those of DFE and are subject to change without notice. The material has been prepared or is distributed solely for informational purposes and is not a solicitation or an offer to buy any security or instruments or to participate in any trading strategy. The investments or strategy discussed may not be suitable for all investors. Past performance does not guarantee future results. Sale of option contracts can be risky and may not be suitable for all investors.
Posted on: Wed, 04 Dec 2013 15:09:18 +0000