Random Market Thoughts

The US economy is showing signs of improvement to confirm short term what the Fed espoused following the FOMC meeting. The durable goods data along with the consumer have been the bright spots to keep the upside moving. As with all things in the market. this will only continue if the data continues to support the outlook moving forward. The December data, released the first week of January, will be a key focus to start the new year. It should set the tone, but the challenge or sticking point may be the December sales numbers for the retail stores. The preliminary data has been disappointing thus far and if it disappoints more than anticipated it could be a bump in the road for the markets.

Commodities continue to be news driven from my view short term. The bounce in crude oil off the November low has been of interest as a trading opportunity, but the bigger question is will the trend sustain itself longer term? A short term target is $104, but if demand from winter driving (holidays) and weather (heating oil) falter in the upcoming reports this could stall the current move higher. Gasoline (UGA) has been moving with the increased demand from the holidays. Same issue with the commodity as we pass the holidays and return to normal cycles. Natural gas (UNG) has been moving on weather related demands in the northeast. Worth taking some profits off the table and managing the risk of the move. Still like this sector for trades (0-13 weeks) not much more at this point.

Speaking of commodities… will gold ever recapture the eye of investors? The recent test of the July lows at $1188 has found some buyers to close at $1212 on Thursday and back above the $1200 level. Is it sustainable or just setting up another short trade in the metal? There is plenty of resistance at the $1250 level if it makes it there in the coming days. Watching for the downside play unless we can take out the downtrend line off the November high. The precious metals have been in a downtrend since the October 2012 highs near the $1800 level. Remember the trend is your friend and to change the trend currently you will need a significant event to take place.

The energy sector has been struggling and trading sideways and testing support since mid-October. On Thursday the sector showed some signs of life again on the upside and made a move back near the top end of the current trading range. The conglomerates showed some upside strength with Chevron breaking from a defined consolidation pattern. This is one to watch heading into the new year as the data above in oil, gasoline and natural gas directly impact these companies and the bottom line.

Interest rates continue be of ‘interest’ as they digest the Fed’s action following the FOMC meeting. The thirty year bond spiked higher near the 4% mark initially, then retreated, but has begun to move back towards that level again of late. The same is true of the ten year bond yield moving towards the 3% level. The primary focus of course is the impact to the housing market and lending from banks overall. Will the upside of rates break through these key resistance levels and continue higher? If yes, we add some new worries to the market that are not currently priced in. If no, it gives confidence to investors relative to stocks and the bottom line earnings potential. BND, Vanguard Total Bond ETF fell below support at $80.30 earlier this week and shows the negative implication to bonds looking forward. Other concerns are the current levels of debt issued over the last four years and the ability to pay the debt in the corporate and municipal bond markets. Definitely one sector to watch moving into the new year.

As you can see there is plenty to discuss heading into the new year. The key as investors is to have a disciplined approach to managing your money and implement the plan daily. Take some time to get focused, review what you accomplished in 2013 and set your sights on what you want to accomplish in 2014.