We are always asked why we do not predict what happens in the next year. After all, everyone else on Wall Street seems to have an opinion on what 2018 will look like. One man said bitcoin is going to $100,000. Hey, that may be next week. We just think it is a fruitless endeavor. There are too many variables during a year. Central banks, governments, Trump, inflation, deflation, interest rate spikes, terrorism and that’s for starters. There is only one thing in our mind about 2018 and that is a normal 10% correction of 2500 Dow points should be in the cards. That means NASDAQ-types probably down 15%. We say this based on three things that stick out…COMPLACENCY THAT IS OFF THE CHARTS COMBINED WITH RECORD LEVERAGE (MARGIN) COMBINED WITH TIME. The time factor is that we have not had a decent correction in eons. That said, we really do not predict and we really do not like to predict. We will only act based on the evidence at hand. As of this second, there is no way a correction of that magnitude is in the cards. That’s because there are too many Dow stocks in uptrends, financials in good shape and major indices trading above all moving averages. Until that dynamic changes, all thoughts on 2018 are just that.
We hope you are having a happy holiday. As we enter the last week of the year, a few things are now sticking out:
Past leading group SEMICONDUCTORS remain relatively weak but you can see they are starting to carve out support. We think there is more time and price before they can get going again.
OILS are all over our screens. A few breaking into nerw highs with many breaking above mid-range levels. We think this is for real but as always, will let them decide.
The same goes for a bunch of COMMODITY names in steel, copper, aluminum and all that crap that if you dropped on your toes, they would hurt.
FINANCIALS remain strong but extended and would love to see some pulling in.
We really do not have much to say on the indices as they refuse to pull back. Just keep in mind, sentiment is off the charts too bullish and too complacent but so far, it has affected very little.