November Review, December Preview

How quickly November flew past. It was a short month, as November always is but it was made shorter by the Thanksgiving holidays in the U.S. effectively giving us only 20 full trading days. Singapore was also shortened by two holidays too. But it was a profitable month although is was mostly flat to the downside.

It was also a busy month for me with almost every weekend burned for something or other.

Penang had its second batch in two years which graduated on 8 November 2010 at Cititel Hotel. Thanks to the “old” students who came back to coach and help out and a special thanks to Low and LK for bringing my family out for dinner … there’s is no better treat that having a hearty meal with your family and friends … IN PENANG!!

WAT (SG) 43 completed 8 weeks of the tutorial on 10 November 2010. This was a really energetic class with all the right stuff in the right places.

Then on 21 November, 70+ Investors graduated from WA after 4 intensive days. This was easily the most outward, open and energetic bunch of investors Adam and I have ever had. It was great fun to be part of this batch. See you guys and gals at the Booster!

In November, I also celebrated my 46th year on this planet, my daughter’s 15th year and my 18th year of marriage. And the highlight was my son’s PSLE results – the boy has done me proud.

Finally and not yet fully accomplished, the Pattern Trader’s new home, PatternTraderTools.com now has a new look and in it, my forum has found a new home there too. I was a massive move. Thanks to Mel.

Yup … it was a busy month.

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“Looking back on a bumpy November” from BRIEFING.COM – Tuesday 30 November, 2010 @ 15:02 ET

Although it was a bumpy ride, the month of November looks like it will end up as a flat month for stocks. The S&P 500 jumped 3.7% in the first few days of the month to set a new 52-week high on Nov. 5 (at 1227), just one day after the Fed released details of its QE2 plans. Since then, it has drifted lower by ~3.5% to its current level just two points above where October ended.

The post QE2 action (stronger dollar, higher yields, weaker equities) shows that the market did a very good job of pricing in the QE2 plans ahead of time. Additionally, a weakening euro as European contagion fears intensify has benefited the dollar, and put a lid on stocks. Our TALKX comments have been discussing this possibility for a greater focus on the European sovereign debt problems since the end of October, and those concerns reached new levels this week after the Ireland bailout failed to ease concerns about Portugal, and more importantly Spain.

We’re now one month away from the end of the year, and the broader market is up ~6% YTD. There are a lot of cross currents in the market right now, with improving economic data being offset by concerns/headline risk around the euro zone. However, the market has been resilient in the face of concerns, and after today’s speech from Obama on a meeting with Congressional leaders, it looks like the Bush tax cuts may be extended in some form or another. While this may have already been expected, Obama’s comments today were viewed as encouraging, since it sounds like clarity could be gained in the near term.

Market summary:
Domestic equity markets. The S&P 500 continued its nearly uninterrupted rally at the beginning of November before reaching the 1,200 resistance level and reversing trend. The S&P 500 and the NASDAQ, which followed a similar pattern, ended the month flat. The VIX, or fear index, has been trending down since May, but may have found a bottom at the 18 level this month. The VIX is currently at 22.86, up 13.8% MTD;

Foreign equity markets. The Nikkei led the group with a gain of 8.1% for the month while France’s CAC and Shanghai lagged, ending the month down 5.1% and 4.2%, respectively. Of the European markets, Germany showed relative strength this month with the DAX trading up 1.5% this month;
Foreign exchange. The dollar, which has been weakening since June, led the pack by appreciating 4.5% this month. The euro, pound, yen, and swiss all ended the month in negative territory;

Commodities. Crude oil, natural gas, and spot gold rose by 4.7%, 7.9% and 3.0%, respectively.

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DECEMBER TRIVIA
It’s Christmas time … There’s no need to be afraid.
At Christmas time … We let in light and we banish shade.
And in our world of plenty
We can spread a smile of joy
Throw your arms around the world
At Christmas time.

~ Band Aid

Those are the opening lyrics of that famous carol that fed millions of starving Africans in November of 1984.

In the markets, the US hasn’t had a really bullish December since 2006. Santa Claus rallies have failed or were miserable for the last 5 years – is there no more Christmas cheer on Wall Street anymore? December used to be one of three of the most profitable consecutive months (Nov through Jan) of any trading year … that statistic has changed very dramatically in the last half decade. Here are the rest of December’s stats;

• December is the second month of the best three consecutive months in the trading year
• The first three trading days of December tends to be bullish
• The second week is usually quite flat to the downside
• The middle of the month is normally moderately bullish
• Small caps tend to do well from Mid December onwards
• The week of Triple Witching December tends to be bearish
• Triple Witching Friday of December is usually very bullish with huge gains 18 out of the last 27
• Friday 24 December is a trading holiday – market will be closed
• December finishes very well going into the New Year
• The very last day of December is reliable bearish

It’s Christmas time … There’s a need to be afraid.
At Christmas time … the rally fails and the profits fade.
And on the Wall, there’s plenty
of greed so vile, not joy,
Throw your arms up in despair
It’s Christmas time!

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SUMMARY

At the start of the year, I mentioned that 2010 was likely to be sideways and volatile … and it has been a very sideways and extremely volatile market all year going into the last month of the year. 2010 has spent almost equal time in negative territory than being positive – on the NASDAQ, 24 out of the year’s 47 weeks so far have closed below the January open of 2,294.41, DOW is 19 of 27 and the S&P500 is 22 of 47.

On monthly closes, January, May, June, August and November have closed down making it 5 of 11 months so far.

On weekly closes, S&P500 was bearish 22 of the 47 weeks so far, DOW and NASDAQ were 20 of 47. With December waiting to start, these statistics are comparable to the bullish 2009 recovery in which 8 of the first 9 weeks were bearish in January and February that year. That year on the DOW, 23 weeks closed to the downside compared to 2010’s 20 by end November.

The close of 30 November 2010 confirmed the third time in four years that November has closed in the red. The last time November closed down before this run was in 2000. With that, the DOW is now only 575.33 points from a negative close for the year while the S&P500 is 63.99 points or 5.73% away from a negative close. The NASDAQ, which has been leading the market all year, is 203.82 points or 8.88% to the good and is the most likely to not finish the year in the red.

Lest we forget, the year started with a bearish January Barometer, 2010 is a year ending with the number “0” and it is Obama’s second year in office – all suggesting that this year was to be anything but bullish.

There are a lot of things happening in the market that are indicating that a market top is near or now. Its not only in the market behavior but in the many other indicators that are usually very reliable such as the number of “Get Rich” workshops available as seen in the recent increase in advertising, the over-confident language used in the newspapers that usually indicate a risky level of complacency and denial, the rising costs of everything you pay for (read: inflation) and the fact that this year’s Christmas decorations look like they are on a shoe-string budget indicating a slow-down in the economy.

One last indication will be the advertising exposure of the retail companies on TV and Press as we get into December’s Christmas sales. This time last year, the papers were already filling out with such ads – this year is a little slow or modest for now. Even my friends in the advertising industry are confirming a slowing in traffic on such campaigns compared to a year ago.

I think its time for a correction. After all, we haven’t had a decent correction since August this year.

Whatever happens, remember that there is always something to be thankful for. And any gyration is an opportunity to make money!

Happy Hunting!

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Comments

We’re already looking forward to our booster class. You’ve been an AWESOME coach! Thank you very very much!

For some reason I could only see about half of the post. Is this something on my end or was this on purpose as a teaser?

Nothing wrong as I can see. I think you need to refresh or wait for the whole thing to load.

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