First let me wish all of you a happy holiday season and best wishes for a prosperous 2017!
Wednesday I posted the Long Term Update for December, so if you follow them keep scrolling down after you finish today’s update.
I’ll be on the road a bit next weekend, so the post will go up on New Year’s Day or Monday the 2nd.
Updating each Saturday, normally. The monthly “Long Term” update will be on a Wednesday soon after the 15th of each month.
Existing Home Sales rose a surprise 0.7 percent to a 5.610 million annualized rate which is a cycle high, well ahead of October’s 5.570 million which is the second highest of the cycle. New home sales jumped 5.2 percent in November to a 592,000 annualized rate that is the second strongest of the recovery. The third-quarter GDP lived up to its early expectations, rising with each new revision to an inflation-adjusted 3.5 percent annualized rate for the best showing in two years. Initial jobless claims rose 21,000 in the December 17 week to a much higher-than-expected level of 275,000. Corporate profits rose 4.3 percent year-on-year in the third quarter vs a prior estimate of 5.2 percent. Weakness in building permits and factory indications offset gains in the rate spread, jobless claims, and stock prices to keep the index of leading economic indicators unchanged in November. Consumer sentiment (U of Michigan) ends December at 98.2, up 2 tenths from mid-month for a new cycle high.
All of the indicators are positive except initial jobless claims. Earlier this year we saw some wild swing in month to month numbers, but when you averaged the two months, I’m thinking June and July, you were basically in line. Let’s see what happens in Jan. But the economy is in good shape.
I searched for current articles on China and Europe, but there is no real new news. All of the major economies are in slow growth mode. Europe announced they will taper their QE more slowly than they had previously stated, indicating lingering weakness, but that is a couple of weeks old.
There is a little concern over Trump’s talk of imposing a 5% tariff on imports and the possibility of trade wars, particularly with China. Some say this is just a threat Trump would throw out to bring the Chinese to the negotiating table, and that he would not really do it. I am sure the Chinese have read his book “The Art of the Deal” and understand his negotiating tactics, and they have cut a few deals over the years themselves, so I am doubtful that this will achieve much for the US. It gives the talking heads something to talk about, like Brexit did back in June (does anyone remember Brexit, or has anyone been impacted by Brexit? No.).
The market is in stall mode this week. Following its run up since the election, many feel much of the economic good news from Trump’s proposed tax reform and capital repatriation have already been priced in, so what is there to push prices higher in the short run. The market has backed down 1% from its record high and could stand more correction to bring buyers back in.
The RSI is at 66, backing off a little from overbought (70), see the upper right of the chart. MACD on the lower right is turning down and two daily histograms have slipped below zero showing declining momentum. It’s not a good entry point and I’ve been taking some profits. The week between Christmas and New Year is a low volume week and usually not indicative of anything as most traders are on vacation. We’ll have to wait until after Jan. 2 for true price action.
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Rich Comeau, Rich Investing