What does it all mean? One of two things is likely to happen because something important is about to happen because markets don’t line up like this every day. Either we are about to create a super bubble or it needs to drop right here. In a crazy market like this you can’t automatically assume anything; you can’t impose your will on the market. The higher probability should be a pullback.
The market is going to skyrocket; the market is going down the drain. It’s the time of year when all the pundits make the predictions for they see in the tea leaves. For my part, I’m surprised it was able to recover and negate last year’s January effect. I think this year will bring us neither. I go back to Fed guidance for three rate hikes this year. How many times they hike rates is irrelevant.
So, they got the Fed, now they’ll get the strange attractor. We have two days to go to get to the seasonal change point. It’s a strange year, not only because of the election ( you knew I was kidding) but because Christmas hits on a Sunday this year. That means we are still a full week shy and perhaps we don’t get the lighter Christmas volume that is characteristic of this time of year until the latter part of the week.
In my report to clients on Tuesday night many stocks seemed to have turned the corner from the recent sandwich pullback and I said it could be the start of the Santa rally. I’m not a rocket scientist. I merely asked myself a simple question. If not now, then when?
As a long-time market participant, I deal in reality and the greatest skill you can have is separating yourself from what Robert Prechter calls the “herding impulse.” In his landmark book on crowd psychology we learn it can actually cause stress, psychological pain and even psychosomatic illness to go against the crowd.
It certainly isn’t easy coming here week after week warning people the market can hit a wall at any time while seeing it go up day after day. While I haven’t urged you to be short, I have basically told people to trade this market with one eye in the back of the head.