Historically positive seasonality What positive seasonality The markets have seen none of this lately as we have a slow grind lower on light volume. Usually, sentiments are optimistic and seeing the bright side of everything as the Holidays surround us. Usually, fund managers need to chase performance before the year is over to make numbers look better. So far, none of this has been seen. Will we see the Santa Claus rally so many are looking for
If you’ve followed me over the past few weeks, you’d be in high levels of cash right now watching this slow grind lower take place. My strategy is to simply be patient and not force trades in a market filled with such negative sentiment. Like society these days, everyone is fearful and expecting bad news. When this takes place in the markets, bulls step aside reducing support levels, so the grind lower takes place. However, The S&P 500 (SPX) is near the 1150 level that I feel fair odds we will see sentiment start to change for the better.
1150 is a support level many traders are eyeing more and more and is a level I discussed last Monday on StockTalks. I’m not making a prediction, as most who make predictions are wrong, but I do believe 1150 will be an area that traders will feel comfortable with the risk-reward of buying. Obviously, this is assuming we do not receive another batch of negative news that the market digests very poorly. For this reason alone, we must keep trades smaller than normal. No reason to feel comfortable risking 100% of our portfolio on such an uncertain market. You risk more when you are very comfortable, you risk less or none at all when you are not very comfortable. It’s important for your survival in the market that you do not gamble aggressively at the wrong times.
Most who follow me are aware of my trading style by now, so apologies ahead of time for being repetitive. Instead of detailing it out again with my own words, I came across something better. One of the newer shows I watch is HBO’s Boardwalk Empire. The other week, the actor playing Arnold Rothstein discussed his betting strategy which I completely relate to. Hopefully the clip isn’t pulled anytime soon from youtube so everyone can see this.
This is exactly what I am doing, I’m trying to be patient which is very hard for me. I’m constantly researching and strategizing. When the time is right, I will aggressively deploy my precious capital and take profits just as aggressively. I feel this keeps me from racking up losses when the market starts to fall apart. The less amount of losses I have to make up for, the quicker I am profitable.
Right now, we are still handcuffed to the headlines. We just don’t know which headline will be most important as the real headline of “Europe is fixed” is not going to happen anytime soon. Some fluff headlines may give that indication though, so it depends on the perception of other market players. This is one reason for such uncertainty in the markets. Over the weekend, great retail sales were reported. Futures are also up as I’m typing this. I expect the retail sector will benefit from these bullish sales figures for the week. More negative EU headlines have also surfaced over the weekend with record borrowing costs due to rising bond yields in Italy and Spain. Belgium received a downgrade as well, another domino falling in the EU situation.
This week in economic data will see a focus on Consumer Confidence numbers Tuesday, Chicago PMI on Wednesday, and the big Nonfarm payroll data for November on Friday. See the economic calendar below for more details.
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Nov 28 | 10:00 | New Home Sales | Oct | 310K | 312K | 313K | ||
| Nov 29 | 09:00 | Case-Shiller 20-city Index | Sep | -3.0% | -3.0% | -3.80% | ||
| Nov 29 | 10:00 | Consumer Confidence | Nov | 44.0 | 43.0 | 39.80 | ||
| Nov 29 | 10:00 | FHFA Housing Price Index | Sep | NA | NA | -0.1% | ||
| Nov 30 | 07:00 | MBA Mortgage Index | 11/26 | NA | NA | -1.2% | ||
| Nov 30 | 07:30 | Challenger Job Cuts | Nov | NA | NA | 12.6% | ||
| Nov 30 | 08:15 | ADP Employment Change | Nov | 110K | 120K | 110K | ||
| Nov 30 | 08:30 | Productivity-Rev. | Q3 | 2.6% | 2.6% | 3.1% | ||
| Nov 30 | 08:30 | Unit Labor Costs | Q3 | -1.9% | -2.1% | -2.4% | ||
| Nov 30 | 09:45 | Chicago PMI | Nov | 56.0 | 57.5 | 58.4 | ||
| Nov 30 | 10:00 | Pending Home Sales | Sep | -2.0% | 0.1% | -4.60% | ||
| Nov 30 | 10:30 | Crude Inventories | 11/26 | NA | NA | -6.219M | ||
| Nov 30 | 14:00 | Fed’s Beige Book | Nov | |||||
| Dec 01 | 08:30 | Initial Claims | 11/26 | 395K | 390K | 393K | ||
| Dec 01 | 08:30 | Continuing Claims | 11/19 | 3650K | 3650K | 3691K | ||
| Dec 01 | 10:00 | ISM Index | Nov | 50.5 | 51.0 | 50.8 | ||
| Dec 01 | 10:00 | Construction Spending | Oct | 0.2% | 0.2% | 0.2% | ||
| Dec 01 | 15:00 | Auto Sales | Dec | NA | NA | 4.27M | ||
| Dec 01 | 15:00 | Truck Sales | Dec | NA | NA | 5.84M | ||
| Dec 02 | 08:30 | Nonfarm Payrolls | Nov | 75K | 118K | 80K | ||
| Dec 02 | 08:30 | Nonfarm Private Payrolls | Nov | 110K | 133K | 104K | ||
| Dec 02 | 08:30 | Unemployment Rate | Nov | 9.0% | 9.0% | 9.0% | ||
| Dec 02 | 08:30 | Hourly Earnings | Nov | 0.2% | 0.2% | 0.2% | ||
| Dec 02 | 08:30 | Average Workweek | Nov | 34.3 | 34.3 | 34.3 |
As discussed above and before, I am building radars each week and sorting through charts often in search of strength during these uncertain times. I am not rushing to buy anything, but I am continuing to build and maintain a shopping list. When the market sentiment changes, I am able to move aggressively rather than just starting my research.
Adolor (ADLR)
AMAG Pharma (AMAG)
Build-A-Bear Workshop (BBW)
Cambrex (CBM)
Conns (CONN)
Ebix (EBIX)
Flotek Industries (FTK)
Cedar Fair (FUN)
GNC Holdings (GNC)
Healthstream (HSTM)
Jaguar Mining (JAG)
Kodiak Oil (KOG)
Cheniere Energy (LNG)
LeapFrog Enterprises (LF)
Procera Networks (PKT)
Royale Energy (ROYL)
Revett Minerals (RVM)
Spectrum Pharma (SPPI)
TASER International (TASR)
Vical (VICL)
As always, do your own homework to see if you agree. Good luck out there.
Mike
At the time of publication, Kudrna was long VICL, but positions may change at any time
