Logo Background RSS

Advertisement

Can The Market Get Its Mojo Back?

  • Written by Syndicated Publisher No Comments Comments
    January 22, 2014

    We’re three weeks into the new year and while some individual stocks have made significant moves, some big winners and some big losers, the overall market has been lethargic. A few triple-digit moves by the Dow (five), but in both directions, no traction either way.

    The result is that the Dow is down 0.7% so far this year, and the S&P 500 down 0.5%.

    That ‘s not a good showing so far for a month with a history of being a positive month as well as being a harbinger for the full year.

    But neither is it any indication of a pending collapse, with even short-term support levels and trends remaining intact.

    012114b

    Last year was a spectacular year. It provided the best one-year performance since 1995, with some of the least volatility in years, and an unusual first year in at least 15 that the S&P 500 did not touch its 200-day (40-week) m.a. even once during the year.

    012114a

    It managed that unusual performance in spite of a still anemic economy, several scares from an embattled and dysfunctional Congress (including the early ‘fiscal cliff’ scare, and later a government shutdown), declining earnings growth, and so on.

    We all know why. The Fed replaced the market’s normal driving forces with the $85 billion a month of extra liquidity it poured into the financial system.

    Is the market just catching its breath over the last three weeks before taking another leap?

    Or is it beginning to think about the changing conditions it will face in 2014, not the least of which is the Fed beginning to taper back its stimulus support.

    But as well there is the high P/E valuation levels as this year begins (created by a market that climbed almost 30% while earnings growth increased anemically); the history of an average 21% decline in the 2nd year of the presidential cycle; the overbought condition above the 200-day m.a.; the age of the bull market; and so on, as this year begins.

    Even an overdue short-term pullback to the 200-day m.a. would be a decline back to 1,700 on the S&P 500, carrying it down to its level of October 16, wiping out the entire ‘favorable season’ gain from mid-October.

    Meanwhile, just the average 21% decline in the 2nd year of the 4-year Presidential Cycle would take the S&P back to its level of Jan. 2, 2013, wiping out last year’s entire big gain.

    So it could be borrowed profits unless a timely exit is made!

    One thing is for sure. It is not a time to be complacent or trusting of Wall Street’s assurances that 2014 will be more of the same, that buy and hold will be the way to keep profits.

    To read my weekend newspaper column click here:  I Sure Hope It Was The Weather’s Fault

    Subscribers to Street Smart Report:

    In addition to the charts and signals in the ‘premium content’ area of this blog, an in-depth Mid-Week Markets report on the stock market, gold, and bonds, will be out tomorrow afternoon in your secure area of the Street Smart Report website.

    Images: Flickr (licence attribution)

    About The Author – Sy Harding, Street Smart Report

    Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!

    It includes our research and analysis on the economy and markets, and provides charts and buy and sell signals on the major market indexes, sectors, bonds, gold, individual stocks and etf’s, including short-sales and ‘inverse’ etf’s.

    It provides two model portfolios as guides. One is based on ourSeasonal Timing Strategy, one on our Market-Timing Strategy.

    In depth updates are provided every Wednesday, with interim ‘hotline’ updates every time we make a trade. An 8-page traditional newsletter Street Smart Report is provided on the website every 3 weeks, in pdf format for viewing or printing out.

    There is the Street Smart School of online technical analysis ‘seminars’,commentaries to keep you ‘street smart’ about Wall Street, and much more. 

Advertisement

Play All Replay Playlist Replay Track Shuffle Playlist Hide picture