December is Here
by
, 12-01-2013 at 04:34 PM (3645 Views)
According to the Stock Trader's Almanac, December is the month in which the S&P 500 (C fund) has performed the best (going back more than 60 years). It is also the month when the January effect begins. The January effect is a seasonal anomaly in the financial market where where the price of stocks increase in the month of January more than any other month. However, the January effect now seems to be begin around mid-December.
So seasonality is now in the bulls' favor.
Sentiment wise, we are quite bulled again at 62% bulls. I have to think we'll get some degree of weakness this week on that reading. Our sentiment has seen some high bull readings the past few weeks and the market has mostly pushed higher on those weeks or ended mixed. That's how market character has been in the short term. But we usually got some weakness during those weeks, even if the market advanced. I am concerned however, that some of the other surveys are also showing higher levels of bullishness. After all, they know seasonality is in their favor too.
Here's some charts:
For the new trading week, total stock allocations rose 1% to 97.88% for the Top 50.
Stock allocations rose a bit more across the auto-tracker from the previous week, from a total stock allocation of 51.06% to 52.59%. We remain cautious even when we are very bullish. That's not a bad thing. Just an observation. I am happy to see that risk management is alive and well on the auto-tracker.
The S&P 500 continued to melt up this past week, hitting fresh all-time highs in the process. RSI and MACD remain positive, but flat. And the chart in general remains bullish. While not depicted on this chart, I checked to see where price was relative to the 50 day moving average. Because if price gets anywhere near 6% above the 50 dma, I’d get more concerned. But currently it is well away from that level. Still, it’s extended since the low in October and due for some downside pressure. But this is a tough time of year (seasonality) to be looking for much.
Still, the sentiment set-up is there for some downside. But the other problem besides seasonality for the bears is underlying market support. It's has been strong. That can change quickly, but it can linger for some time too. This would be a good spot for the powers that be to catch a lot of bulls off guard too. Take it down hard so they can reload while shaking loose a lot of bulls and then launch it again. We'll see. If it comes, I'm ready to buy.
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