November 2011 In Review, December Preview

Posted by Conrad
December 1, 2011

What a month!!

I started off the month of November on the 2nd with a second surgery in two months – to remove that huge nagging bunion on my right foot. This laid me up for three weeks with a 3.5inch cut that was held together with nine stitches. Needless to say, I was very immobile. But that was the blessing because it confined me at home (again!) and all I could do was TRADE! And boy, did I trade. Everyday, I was scalping oil and making my bonus for the year. It was great timing too as oil hit a high of $103 and it always gets easy when oil is either at a high or a low. The ranges were simply beautiful and predictable.

I struggled to get my schedule back by hobbling back to class (Batch 53) complete with walking stick, post-op wedged shoes and all on 11 November to graduate a really exciting batch of traders.

The following week was back to my crazy schedule which included a WA booster and the November Gathering. On 24 November, I got the nine stitches out of my foot which was a fitting birthday present. Batch 54 celebrated my birthday on the Tuesday before that and it was such a blast! Thanks Irene, Jing and Pei Fen for the effort that went into creating all those lovely cupcakes for everyone!

Then on 25 November, I did another talk at CIMB to around 50 local traders and investors.

Finally, to cap off a packed second half of November, I talked to more than 90 WA graduates last night (30 Nov) about the current economic climate and gave them an outlook for 2012.

MARKET MATTERS

The market looked like November was going to be a killer month. If October of 2011 was the best month on the S&P since 1974, then by Thanksgiving, Wednesday 23 November 2011 after the close, November 2011 was already on track to become the worst November since 1987’s Housing Bubble (-8.99%). The loss on the DOW for the month (-5.8%) had already surpassed the November 2008 drop (-5.07%) and the November 2000 dip (-5.33%). And we only had three and a half days of trading remaining. In my Daily Market Analysis on Monday 28 November before the market opened, I said;

With three sessions remaining, its going to take a major rally of 346 points for the DOW to get back up to break even for the year. Even if that happens, November is set to close in the red as it will take a massive 720 point rally (or 240 points a day for three straight days) to break even for the month. It looks like the bear run that started in May is set to continue after that quick reprieve in October.

And whenever you least expect it, the impossible becomes possible. The last three days of November produced an amazing 813 points on the DOW to close out the month in positive territory. With that, of course, the DOW is back up in positive territory for the year too. And for the record, Wednesday 30 November 2011 was the DOW’s largest gain of 2011 and the best percentage gain since March 2009. Despite today’s run-up, the Nasdaq and S&P 500 are down for the year.

Now with the The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank announcing a coordinated action to enhance their capacity to provide liquidity support to the global financial system, all of a sudden, there is some real hope of avoiding one of the most catastrophic financial crisis in modern history. The purpose of this is “to ease the strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity”.

The U.S. has also been consistently improving on its economic data with improved numbers on manufacturing (November Chicago PMI 62.6 vs 57.5; October 58.4), housing and employment. This has lent even more weight to my analysis of why America has been keeping monetary policy at such a ridiculously low rate; to bring down global currency values and level the playing field so that trade and commerce is more balanced. This is now happening as countries all over the world including Japan, Australia, China and Singapore lower the value of their respective currencies to keep trade balanced and fair. When valuations get lower, America will be poised to truly recover and take the lead in the global market again and free market capitalism will rule and conquer once again.

It all now hinges on the success and size of the effort of the central banks. As they scramble to get things together, European yields pause their parabolic rise and forex trades start to form some semblance of normalcy. How long this will last depends entirely on the central banks’ next press release that should either signal long term sustainability or prove that this 760 point spike is nothing more than misplaced short term euphoria.

Time will tell.

Trivia For December

Its the final month of a very volatile and exciting year. Will we have a Santa Claus rally? Will we finish the year up as the many prophecies have suggested – January Barometer, December Low, Valentine’s Day Indicator, Pre Olympic Year, President’s Third Year, etc … it will be a race to the finish and it is going to be a thrilling one! So bring it on!!

December has 21 full trading days, one public holiday and two holiday eves and is known to be very bullish. December is the second of three months (November, December and January) that represent the best three consecutive months of the trading year.

December Trivia

Commodities

SUMMARY

So as America improves on its fundamentals and Europe’s worries get a reprieve, questions remain on the state of the Asian markets. With China’s and Australia’s PMIs contracting and their property market’s weakness getting more serious, there is little cause for happiness in the east.

Caution is still the key watch-word going forward but don’t allow that to spook you out of the occational bear rally.

Trade Safe & Happy Hunting Always!

To all Spammers … Either get a real life or drop dead and die.

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