This is the next installment of my retrospective. I’m choosing the most relevant, interesting and useful commentary from each month and them in these posts as a means to both recap the roller coaster year we just went through, as well as to learn from past mistakes and savor the sweet, sweet victories.
If you’ve missed the previous one’s here they are:
Heading into the home stretch now! Here are the highlights from November 2009:
- Selling Vacuum Supports Uptrend
Lowry Research and InvesTech both have a proprietary measure of “selling pressure” in the stock market and recently they both have signaled a major inflection point. While almost everyone looks on incredulously as the stock market climbs higher, the answer may be that there is a selling vacuum. The long term chart of this metric certainly suggests that’s what we are seeing.
- What If Wall St. Threw A Party, And Nobody Came?
Retail investors have ignored the equity bull market entirely and instead, diverted their assets into fixed income mutual funds. This is remarkable and speaks to the toll this recent bear market inflicted. In the medium term, as contrarians, we can interpret this as a positive for the continuation of the rally but in the long term, the stock market needs new asset inflows.
- Stocks Have Little Room To The Upside
Turning a third time to the gap between the daily close and its 200 day moving average, the S&P 500 index once again approached top-heavy levels at 1100 in November. It was flat for the rest of the month and most of December. And even with the Santa Claus rally, it only climbed 2%.
- Isolating Gold From US Dollar Weakness
Have you ever wondered how much the fluctuations in the price of gold have to do with the weakness or strength of the dollar and how much they have to do with the actual supply and demand dynamic of the gold market? Here’s one way to tell them apart.
- New Highs For The Year But Market Breadth Stinks
Even as the stock market was peeking at new highs, the underlying momentum as measured by the advance decline numbers were surprisingly weak. This suggested that there isn’t much power behind a potential move the upside.
- Canadian REITs Recover: Time To Exit
Back at the start of the year I was bullish on the Canadian REITs as they were the proverbial baby being thrown out with the bathwater of the financial crisis. Fast forward a few months and we have a huge winning trade as prices bounced back strongly and as monthly distributions continued to be paid monthly.
- Treasury 3 Month Bill Yields Fall To Negative
You thought the credit markets were thawed, didn’t you? And then suddenly the short term government paper goes to zero and slightly negative - meaning that people were actually paying the government to hold their money! Astonishing. Since then the 3 month T-bills have fallen in price and rates have risen to more ‘normal’ levels.
- Dollar Carry Trade Correlates All Risky Assets
Did you notice that 2009 was a year where all sorts of disparate asset classes were correlated? where almost every single asset class went up? You can thank the Fed induced US dollar carry trade.
- Losing The Generals: Market Leadership Deteriorates II
This was the second part of an analysis of the waning momentum and breadth in the general stock market. My premise was wrong as small caps roared back to life in December, hitting new highs for the year.
- Gold Goes Parabolic Again & Again & Again
Everything about gold in November was a screaming sell: the manic sentiment, the parabolic chart, the overcrowded trade as shown by the Commitment of Traders data, the distance of daily close from its long term moving average, etc. Gold pushed higher valiantly into early December but it was futile.
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