Short-term Risk Level: 4
Bottom Line
We had some mixed stats yesterday (negative Intel
pre-announcement bias versus positive FOMC-day bias). The negatives were
short-term only, and we still have the positives heading into option expiration.
Another down day would trigger a number of oversold signals and should set up a
rally into week-end at least.
Dollar Bulls Near Multi-Year
High
Public Opinion on the
US Dollar is the most optimistic than sentiment on any other currency or
commodity contract. It is now at a level matched four other times in the
past five years: 11/18/08, 3/10/09, 5/18/10 and 10/4/11.
Because
of the consistent inverse relationship between stocks and the Dollar lately,
tops in the Dollar have coincided pretty well with bottoms in stocks.
The big caveat here is that the US Dollar Index
could spurt up to 82.50 or so over the next few weeks without violating the
precedents. If it would keep rallying after that, then chances are
good that it has transitioned to a new long-term bull market.
Traders Still Avoiding Lottery
Tickets
Trading in
Over The Counter securities dipped again in November. That's not too
surprising given the volatile market, but it's still abnormally low. As we
discussed last month, this lack of speculative activity is on a par with the
last two
major market lows.
This seems very unusual. If anyone has any
information about regulators or brokers changing penny stock trading rules, I'd
love to hear about it. Try as I might, I cannot find any structural reason
why volume would be so depressed other than poor sentiment among speculative
traders.
Another Never-Seen-Before
This was the first time that the S&P lost -1% or
more the day before a FOMC decision, and then more than -0.4% the day of.
Add it to the large and growing pile of never-seen-before market movements we've
been subject to since August.
For what it's worth, there were 5 times it
declined by any amount on a December FOMC day. Into year-end, the S&P rose
3 times and declined modestly twice (-0.1% and -1.2%).
