KWN is about to release an interview with James Turk discussing the gold and silver rally and what to expect next, but first a must read from a legend in the business…
This Is Going To Be A Very Interesting 2018
January 5 (King World News) – Here is a portion of today’s note from legend Art Cashin: Fastest Thousand Point Run Ever Ends In Close Above 25,000 – A variety of market pundits made much of the fact that this was the fastest 1000 point move in Dow history. Most forgot to note that this 1000 points is the smallest “percentage” move in Dow history.
For the Dow to go from 1000 to 2000 was a 100% move. That takes a lot of huffing and puffing. But to go from 24000 to 25000 is only a 4.2% move. The fastest ever – yes – but keep it in perspective.
At any rate, the caps were out and the bows were taken – most notably in Washington. To those of us with a mildly superstitious nature that’s a bit of baiting or tempting fate. As you recall from your fifth grade study of the Greek tragedies, its often the kind of hubris that comes home to haunt the hero. For the sake of both the President and the country, let’s hope that’s an incorrect observation.
At any rate, the extended Santa Claus Rally has been both stunning and global. Index after index has moved to either record or multi-year highs.
The New Year rally stretches not just across borders but across sectors with buyers leaving a very broad swath.
Traders will look to the payroll data. If its super strong, will it turn the rally into a melt-up?
One Friend Quotes Another On The Potential Market Course – In his Thursday note, my dear friend, Jeff Saut, the resident genius of Raymond James reviewed a January/February pattern for the S&P. Here’s a bit of what he wrote:
In addition, we will repeat a comment from Sam Stovall (Bob Stovall’s son, who was the keeper of the GM Indicator in an era gone by), who wrote this back in February 2017:
“Since 1945, there have been 27 years when the S&P has achieved gains in January and February. The stock index then finished up for the year (on a total-return basis) in every one those years, according to Sam Stovall. That’s going 27 for 27, or batting a thousand. The average rise in those years was 24% …and the gauge was up further in the remaining 10 months 25 of 27 times.”
So, based on the past two sessions we got a marginal Santa rally; and, the first week of January is shaping up for a positive January Barometer reading as well. Accordingly, if the senior index can rally in January and February it is likely Sam Stovall’s quote will be in-play and the December Low Indicator will be a non-plus. We remain bullishly configured with a tilt toward commodity-centric stocks given recent developments, including the under-loved midstream MLPs, which have leaped off of their recent lows. This morning the preopening S&P 500 futures are better by about 3 points as we write at 5:00 a.m. It feels like the equity markets are beginning a whole new leg to the upside.
Some Cautions From History – The always insightful Jason Goepfert at SentimenTrader has scanned his virtual unparalleled data base and found some areas for caution.
Here’s a bit of what he wrote:
A(nother) historic streak. After setting so many different records last year, 2018 is on track to score even more. Among them, the major indexes haven’t been more than 5% from a 52-week high for nearly 400 days (more than 450 days if we exclude a single day last June). There were 3 other time periods that matched what we’re seeing now, and after each of them, the S&P 500 declined more than 7% over a period of 30-40 days
All in, part deux. Individual investors have the most stock exposure since 2000, and their short-term optimism is now rising. It has done an about-face during the past two months, going from pessimism to the 2nd-highest optimism since the 2009 low. The AAII Bull Ratio is nearly 80%, a level that has led to poor annualized returns. The times when it got this extreme with stocks at a high, future gains were erased
Rising risk. For stocks, the combined Short-Term Risk Level and Medium-Term Risk Level is 13. Over the past 3 years, when the combined value has been above 12, the S&P’s annualized return is -1.6%. When it has been below 9, the annualized return is +51.4%.
Not quite a series of run for the exits warnings but enough to suggest you take the building euphoria with a grain of salt you could carry around in a wheelbarrow.
Overnight And Overseas – In Asia, Japan and India had solid rallies, while Hong Kong and Shanghai rose more modestly.
Stocks also continue to rally in Europe. London was up a bit modestly (more Brexit chatter), while continental markets were solidly higher.
Among other assets, gold continues to grapple with the $1320/1325 resistance. WTI has dipped back below $62. The euro is a touch softer against the dollar and yields are a smidge higher.
Consensus – As noted, traders will look to payrolls. They will not just watch to see how stocks react but perhaps more importantly to how yields react.
Let’s hope Santa has a few more gifts in his bag. Stay wary, alert and very, very nimble.
Have a wonderful (and hopefully warmer) weekend! ***King World News has now released the timely and powerful audio interview with James Turk, where he discusses exactly how he expects gold and silver to perform in 2018 as well as the mining shares, US dollar, cryptocurrencies and much more CLICK HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: Is This About To Send The Price Of Gold Soaring? CLICK HERE.
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