As we enter the final stretch of the year, the major indices are enjoying the end of year move we expected. This same thing occurred last year with the market topping the first day of 2014.
You are hearing it every day. Major indices in new high ground. We will not argue but for those reading this report, the market has been more of a two-way street. Simply put, we have been urging you that regardless of the major indices, you should avoid the following areas:
Oil & Gas
Gold & Silver
Aluminum, Copper and all that stuff
Russia, Brazil and most commodity-based countries
Small caps vs large caps (more on that in a second)
Rails (not all)
The good news is that on top of the major indices, there remains a good sized list on what is working:
Biotech…but careful. This group held the 50 day last week after a serious sell-off. A break below would change the stance.
Retail-dept. stores, home improvement, discounters,apparel,drug stores
Utilities- on fire
Big banks and big regional banks
So you can see a very split tape. If you were in the first group, you would be feeling ill. So pay attention as we enter the new year.
As far as the small caps, a word to the wise. Many are yapping about the Russell 2000 finally moving out of range to the upside. We expected some of this as we entered the period of the January effect. We are just not so sure this will be long lasting. We hope there is more to this because if the small caps can get going, this move will get legs.
Just keep in mind, this move again coincided with Japan and Euro heading into printmoney land and China lowering rates even though they are supposedly in good shape. The GRM (Government run markets) remain in force.