Economic News Was Bullish – Bid Is Still Strong. Let this Wave of Selling Pass – Then Buy the Dip

December 5, 2013

After calling the market perfectly this week, it is a bit depressing to get one review. I put hours into this free research each day. Please keep me motivated by posting a review on INVESTIMONIALS

This week we’ve seen a little profit taking. The market is up 25% this year and that is natural. When the momentum stalled, some traders reduced risk. Asset Managers pulled bids so that they could gauge the selling pressure. Bullish speculators were tested and many were flushed out of positions. The price action was very telling this week.

Asset Managers will buy dips and the bid is still strong. The declines Tuesday and Wednesday were brief. Buyers stepped in and the losses were small.

Domestic economic releases have been excellent. ADP came in much better than expected yesterday. This morning, GDP blew away estimates. Some of that gain was due to inventory adjustments, but the number was still very strong. Initial claims fell below 300,000. This sets us up for a big jobs number tomorrow.

Tapering fears have surfaced and any decline will set us up with an excellent buying opportunity. We need economic growth for this market to move higher.

The Fed will not do anything until Janet Yellen takes office and the debt ceiling is extended. Loose monetary policies have not stimulated economic growth and the training wheels need to come off. This economy should be able to stand on its own two feet.

This wave of selling should climax Friday and the SPY should find support at $178. Hope for a big drop.

The FOMC will not taper in December and that will be the first catalyst for the bounce. Then, you will hear that Congress is “close” to a budget deal. I am not looking for a gangbuster rally, but a move from SPY $178 to $182 would provide a nice opportunity.

This is the last round of big news for 2013 and it needs to result in a decent move. A decline and a rebound would be nice. If this does not materialize, we could be stuck in a very tight trading range as buyers and profit takers pair off.

In 2014, Obamacare will weigh on the economy. That could take months to bear out and we still have time to get long.

Interest rates will creep higher. As long as they are accompanied by strong economic growth, this is healthy for the market. The initial reaction will be negative, but it is a “buy the news” event.

Conditions in Europe, Australia and Brazil are faltering. We need to keep an eye on global growth.

Don’t short this move. Stay on the sidelines and patiently wait for support. If we hit an air pocket today, I might buy some calls around SPY $178. The news this week tells me that the jobs report should exceed 200K tomorrow. This will spook investors and many will call for December tapering. For this reason, I don’t want to load up today.

This is been a fantastic year and I don’t want to give my profits back. Consequently, I won’t be trading more than 20% of my normal size the rest of the year.

The news this week has been very bullish and the price action tells me that the bid is strong. A dip will flush out bullish speculators and it will present a nice buying opportunity into year-end.
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