SOX

Seriously, ever since Wednesday the S&P 500 has been drifting lower and the move to the recent high has a calculation to it. From the low on the 13th we can make a case for a first leg of 24 points and a bigger leg of 63 points. You don’t even need the calculator to see it’s a 2.62 ratio which means we either have a high or a 3rd wave high. It’s also back at the top of the channel lines. Since Wednesday they put in a bear belt on Friday.

Last week I spoke about the lack of public participation, which would prevent this market from really being in a bubble.

We realize a lot of the money given to the banks in the early Barack Obama years never made it to Main Street. So the banks and Fed tinkering helped drive the stock market to the stratosphere. One has to realize as we enter the back end of the one year anniversary to the February 2016 bottom the stock market has accomplished all of this without the kind of public participation we’ve seen in the past.
For right now, most of the sectors look decent. The SOX is a problem and even the oil stocks found a low. Oil recovered and is still a giant roller coaster. Even Europe is improved and the CAC turned back up with an interesting low at 233 hours and a price of 4733. When I started writing on Sunday night I thought it would have a shot at higher pricing.
What does it all mean? One of two things is likely to happen because something important is about to happen because markets don’t line up like this every day. Either we are about to create a super bubble or it needs to drop right here. In a crazy market like this you can’t automatically assume anything; you can’t impose your will on the market. The higher probability should be a pullback.
The market is going to skyrocket; the market is going down the drain. It’s the time of year when all the pundits make the predictions for they see in the tea leaves. For my part, I’m surprised it was able to recover and negate last year’s January effect. I think this year will bring us neither. I go back to Fed guidance for three rate hikes this year. How many times they hike rates is irrelevant.
So, they got the Fed, now they’ll get the strange attractor. We have two days to go to get to the seasonal change point. It’s a strange year, not only because of the election ( you knew I was kidding) but because Christmas hits on a Sunday this year. That means we are still a full week shy and perhaps we don’t get the lighter Christmas volume that is characteristic of this time of year until the latter part of the week.
In my report to clients on Tuesday night many stocks seemed to have turned the corner from the recent sandwich pullback and I said it could be the start of the Santa rally. I’m not a rocket scientist. I merely asked myself a simple question. If not now, then when?
As a long-time market participant, I deal in reality and the greatest skill you can have is separating yourself from what Robert Prechter calls the “herding impulse.” In his landmark book on crowd psychology we learn it can actually cause stress, psychological pain and even psychosomatic illness to go against the crowd.
Another week and the rally continues. I suppose this is getting boring.