Stocks are acting about as expected – choppy, up and down, which is one way to resolve the overbought condition. We have an interesting situation with XLV, a sector that I think has a lot of potential.
January could be a bit dicey – as the November/December rally has discounted strong fundamental developments. It is interesting that the stock market is suggesting that inflation is dead, when some of the technical indicators are suggesting resurgence in commodity prices in 2024.
We continue to see evidence that the market is broadening out – RSP had a great week relative to SPY, and Small and Mid-Cap names also performed well. We expect TLT to have some choppy pullback this week, but the data suggests a major pullback is unlikely – hold fixed income positions.
We have discussed our belief that the equity markets would start to broaden out, moving away from the emphasis on Tech, broadening into other sectors and areas of the market. IJR is an intermediate-term base with 90-area support and 100-area resistance, which is why we are using 100 as the neckline of the Head and Shoulders pattern. As long as GLD can hold 185 on a pullback the short-term trend remains up.
Stocks are correcting sideways, which also can resolve the overbought condition on some of the indicators. One of our more controversial ideas for a trade into yearend, is to buy banks – regional banks in particular.
Stocks are short-term overbought as we come into this week, but intermediate indicators still suggest upside, especially after a short-term correction. One of our concerns is the condition of the Transportation indexes.
Stocks are overbought, so we could see some pullback next week – but otherwise we still think prices should be at least slightly higher from here at yearend. TLT should consolidate in this area, but below 88.50 would be a concern.
Our internal indicators have improved last week, but not as much as we would have thought it should. We have talked about the need for the market to broaden out, and one of the areas where we need to see improved performance is small cap. MSCI Turkey Index Fund (TUR) This could see some window dressing into the end of the year, and a move above 40 would be gravy.
We ran our indicators this weekend, and frankly, the results are somewhat disconcerting. We will hold long positions but be a little tighter on risk management than we have indicated.
Stocks are a bit stronger than expected, and still have not made an effort to fill the two big gaps at 430 and 425 on SPY. We would love to see TLT test 86 before challenging 90.
Accumulation models recovered somewhat but have not erased the technical damage done in October. Breadth and price oscillators have improved but some are still in a negative configuration. One of the problems with last week’s trading was that several gaps occurred, and this week should see some pullback to fill these. Since there is some possibility of Japanese government intervention to support the Yen, we will recommend EWJ for a trade into yearend.
The 423-area on SPY, and the 357-area on QQQ are the next resistance. Keep watching the interest rate indexes. It looks more and more like the Japanese Government has embarked on a policy to reduce the value of the Yen.
Indicators are oversold enough that we should still rally, but a yearend advance may very well be weaker than we have expected. There has been a hit to our strong accumulation models, but it is not too severe, and the market is actually generating some buy patterns on the FPO’s, and my breadth oscillators as well.
