Just a couple of weeks left before the Christmas holiday and the pressure is on. I’m not talking about the stores and shoppers, which will no doubt be crowded up until the last minute. No, I’m talking about managers trying to beat the markets or specific bogeys. Time is running out before year-end and many would like to catch some good relative performance before Dec 30. With the volatility, uncertainty and multi ‘black swan’ events this year it’s no surprise that 75% of fund managers are worse off than the SPX 500. However, the chase is still on for some improved performance and I suspect a good buying push into year end.
Time for Remembrance – Enjoy this great song by John Lennon (hard to believe it’s been 31 years)
The news is still driving market action and delivering whiplash everyday. What I find is an uncomfortable feeling putting on new positions, almost like holding your nose before diving in as you know it’ll be mess and probably smell awful. This week gave us good news from Europe but mixed sentiment for the markets. Traders held their breath on Wednesday, exhaled the rest of the week and we found ourselves up a decent amount. I don’t believe there is a tragedy here as the markets took the news in stride (see chart below), volatility collapsing once again giving those a chance to get on the trend.
The charts are setting up for a decent move, the odds favor higher. Technical indicators are lined up to show the way to higher relative levels. The 200 ma continues to be resistance but Thursday’s drop may have wiped out some of the excess enthusiasm from the prior week. Market correlation is tight with stocks now making individual stock picking the most challenging exercise and tough to beat the market under those circumstances. With high market correlation the diversification ‘free lunch’ is not at work. As the volatility drops complacency makes its way into the trade, clearing the way for dip buyers to pick up the pieces (like this past Friday). Maybe then we’ll see shoppers come in and hit their stride!