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Market Talk / Dec. 4 - 10
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There is the risk that a negative divergence could occur if the DJ Industrials were to reach a new high (10,997) but the DJ Utilities, which are nearly 8% below their October peak, fail to hit a new high (440).
One historical point perhaps worth noting is that large gains in the market in November have, on average, been followed by more subdued performances during December. In fact, since 1950, there have been 10 Novembers in which the S&P 500 has registered a gain of 5% or more. The average net change during the Decembers that followed was only plus 0.8%, and four of those 10 Decembers actually produced net losses. With the S&P 500 recently up about 5.1% for November, there is a risk that December could be a much more difficult month for the market than November was. I'll take my chances - riding this bull should not be easy anyway - staying 100% C fund all the way.
The Fed will raise policy rates by 25 basis points at the December 13 FOMC meeting. The only real question is how the press statement will change. If the word "measured" shows up again, it would mean that "we are likely to go again January 31". If the statement retains the phrasew "policy accommodation", it would mean that "we are nowhere near where we want to be." The Fed has never stopped tightening while policy was "accommodative", let alone "neutral" An overshoot this cycle would take the funds rate to at least 5%. That, in turn, would put the rally that financial stocks have been enjoying since mid-October at risk. I bet the wording will change and they will pause after 12/13.
The Technician (escapades at times as Carnac)
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