Happy New Year
Low volume and a short week but a few hundred point swings in the Dow last week. The
Dow Jones slipped 84 points while the Nasdaq NDX slid 5 points. The Russell index RUT
fell off the shelf and now lags the broad based stock indices. Normally we would expect
small cap stocks to rally this time of year giving way to the “January effect”.
Sector Action for the week was plus 141 with 4 sectors up and 27 down. Trends have
improved but the real story over the last few months has been increased daily volatility. I
suspect suspending the ‘uptick’ rule in the summer helped this along allowing computer
trading bots to run rampant with news or a new algorithm. This is good for traders but
causes investors a few more gray hairs. Momentum chasers get killed in a Trading range
environment buying as the market gets to the top and selling near the lows.
Beware of market predictions for next year based on whether the FOMC will lower interest
rates. Unless they raised or lowered rates significantly it should not make a difference.
Next years story is likely to be Housing (not sub-prime) Oil and the Olympics ( how the
World interacts).
Rydex Alerts- Bearish Dow, Rut and OTC looking to cover Monday.
Short term Trading indicator- Neutral
INTERMEDIATE TERM TRENDS- Neutral
INTERMEDIATE OSCILLATOR – Neutral
Oil Patch XOI, XNG, OSX - Numbers 1,2 & 3 in overall rank and the three sectors with
the strongest momentum. Some of this is year end window dressing as these sectors
have been market leaders all year. For the last few years the Dow Jones and S&P 500
have had positive correlations to the Oil Patch sectors. We will see if the dance continues
when oil goes above $100 bbl.
Ultra etf’s- You must use these bullish and bearish funds to manage and current volatility.
Sold Bullish NDX QLD, Bullish Small Cap SAA and Bullish Tech ROM at small profits.
Financials XBD, BKX, KCE, KIX- Stuck in the mortgage mess and perhaps leading the
economy into a recession. Banks in particular have fallen and can not get up. Value
players may be buying some for a bounce going into the new year. The Ultra Bullish
Financial UYG is good for this kind of play.
Technology TXX - The best hope for the Bulls. Apple AAPL and Google GOOG are the
lead dogs.
Pharmaceutical DRG and Biotech BTK- Fell dramatically into the bottom ranks which
means institutions are taking money out of these sectors.
Gold XAU- Shot up in relative rank. Printing money is one way out of the mortgage mess
making Gold and hard assets all the more valuable.
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