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We should always avoid reacting to short-term data. While the following analysis is as at last weekend, I believe the perspective will hold true by the time you read this.
So this is what we see as at Friday, 14 December:
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We are seeing a strong market and a new trend over the last month, which surprises me. I acknowledged in previous articles this was a possibility rather than a probability. If I had known this was going to happen I would have bought in but only as short-term trades. Having said that, I would have had difficulty picking which stocks to back. And even now I don’t see many sectors that will carry the market to new highs.
Let’s look at some:
XFJ:
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It is important that this sector – banks - should show strength but I cannot see this in the chart above.
XMJ:
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Materials is another mainstay that has been on the decline for more than a year and is meeting some resistance at current levels. It could move higher but I can’t see this sector developing a strong trend in the medium term.
XNJ:
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This sector is also languishing.
XDJ:
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Discretionary is a sector that reflects consumer outlook for the future and this chart suggests investors in this sector have a different outlook than consumers. But the run suggested above is very short-term.
XSJ:
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This is another consumer sector and reflects the everyday items we have to consume to stay alive. Again, we see the prospect of a short-term move higher.
On the DOW, one chart indicates a small move higher:
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But most other charts suggest there is not much more to go in the upward direction:
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But further out (that is, the weekly chart), indicates that 2013 could be, on balance, mildly positive:
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So while there is some ‘cheer’ in the charts, caution is warranted.
I wish you a happy festive season and hope that 2013 brings you and yours good health and fortune. Thank you for your support this year. I have enjoyed sharing my thoughts with you and I look forward to being at your service in the new year.
Take care.
Enjoy the ride
Tom Scollon |