Market Update - January 6, 2017
We would like to wish everyone a very happy 2017. This week we are getting right to work with the first big economic news of the year, the December jobs report. Bloomberg has the range for December of 151,000 to 210,000 jobs created, with the consensus at 175,000. The number came in light at 156,000. The question for 2017 is, Will pro-growth polices get this number climbing? Let’s review our indicators to see what they are saying about the markets.
10 Week Bullish Percent (Short-term): After hitting the overbought level of 72% in December, the 10 week saw a small pullback to 66% and then another run to 72%. This indicator is at overbought levels. A 2-4% pullback in equity indices could happen at any time.
Optionable Stock Bullish Percent (Intermediate term): This indicator is now on OFFENSE at 62%. This is the same level it hit in August before turning lower.
NYSE Bullish Percent (NYSEBP) (Longer-term): This indicator is on OFFENSE at 66%. This is the same level it hit in April and August, before turning lower.(Source: Dorsey Wright)
Point and Figure Charts (Source: Dorsey Wright)
S&P 500: The S&P 500 has rallied to 2,275 and now has been displaying a sideways, consolidating type of pattern. This is not surprising after such a sharp run up, post-election. First, support is now 2,250, which was briefly tested this week before recovering to 2,270. (Source: Dorsey Wright Website)
Crude Oil: Crude oil has come roaring into the new year and has hit the $55 level. Next level to challenge is the $57-$60 zone. The trend still looks to be higher. (Source: Dorsey Wright Website)
Continuous Crude Oil
US 10-Treasury Note: The 10-year has finally seen some pullback in the New Year. Rates have floated down to 2.45%. The next level to watch is 2.3%. A break under 2.3% could see lower yields rather quickly. In 2013 rates peaked at 3% before going lower. Any bearish global equity news at the start of 2017 could get this market back to 2.3%. (Source: Dorsey Wright Website)
Relative Strength: The weakness in the bond market and the commodity market is causing another lineup change. For the first time in several years, International Equities have made it to the #2 spot. Domestic Equities #1, International Equities #2, Commodities #3, Fixed Income #4, Cash #5 and Currencies at #6. (Source: Dorsey Wright Website)
The beginning of the year is when everyone wants to hear a game plan for the new year. Below we will list our bullet points for 2017.
- 2017 could be the year of equity volatility, since 2016 the CBOE VIX finished at historic lows;
- The US Economy is poised to face headwinds because of the strong US Dollar;
- Concerns about the European economy and banking system continue to dominate the investment headlines;
- Interest rates stay stable and the Fed slowly increases short-rates, with the potential of another two times, finishing 2017 at 1%;
- Investors continue to focus on energy and oil prices. The energy sector continues the turnaround it started in 2016; and
- The out performance by “value and dividend stocks” revert back to focus on growth companies. Investors begin to look for value in healthcare, biotech and beaten down technology stocks.
Have a great weekend! It’s going to be a cold one!
Happy New Year!