Market Light Weekly Update December 5th, 2017: A Seasonal Evergreen

John Dupriest Market Light, Uncategorized

It’s about as “evergreen” as we are likely to see it. The Dow Jones Industrials have been on a tear. The index has set a new record high 80 times this year. So far. Wow.

 

Much of that movement in recent days/weeks has been on the expectation that tax reform will aid the big established firms like the 30 Dow stocks more than  … oh, let’s see … say the formerly (and probably future) ferocious stocks collectively called FAANG. FAANG is an anacronym for Facebook, Apple, Amazon, Netflix, and Google. (See the index chart of these combined companies below). These stocks along with others of their ilk have high reinvestment and Research & Development costs which may not end up being treated all that well by tax reform. In many ways these stocks herald the new economic realities; they are not likely to suffer too long. Selling in these stocks may also simply have been the result of profit taking. Today, they are all up a bit.

 

There is another interesting dynamic at work: The US trade deficit (more buying of overseas goods than selling of our goods to international markets) is the highest since January. And that is despite an increase in selling domestic petroleum to overseas buyers where we actually had a trade surplus. Record levels of imports came in from both China and Mexico. Over $300 million of that deficit came from purchases of cell phones and other household goods, as well as more inbound shipments of furniture, appliances, toys and clothing. Happy Hanukah. Merry Christmas. Lots of green, but how long will things stay fresh and fragrant? We will have to wait and see.

 

Strong performing ETFS include:  US Home Construction (ITB), Retail (XRT), Regional Banks (IAT), Financials (XLF), and Rare Earth Metals (REMX).

 

Laggards were: Natural Gas Futures (UNG), Silver (SLV), Mexico(EWW), Canadian Energy (ENY), and Gold (IAU).

 

The Technical Tea Leaves are short & sweet (as always, we will have to wait and see!): The new high/new low indicator has reversed to the downside.  This is a reliable bearish signal that  is often followed by an downward price movement. In this up-trending market a trend reversal could occur in the near future.