The popular averages bounced well to the upside on Friday. The unemployment rate
fell in November while non-farm payrolls grew more than expected. Consumer sentiment
also soundly beat expectations. If economic conditions grow swiftly enough, that
may justify any Fed tapering and calm fears of it. Meanwhile, the price of crude
oil rose while gold fell on Friday.
Above is my three-month chart of the S&P 500 exchange traded fund (SPY). During
late August, Wall Street and media pundits along with market newsletter writers grew
increasingly negative regarding the stock market just as they did after the presidential
election last November. Just as I did back then, in late August I moved counter to
the bears and resumed my bullishness. The SPY price in early September sailed above
its 50-day moving average. That was a bullish sign. The FOMC deciding to put off
any tapering of its money creation program provided the final boost to the September
Then the SPY price pulled back and began waffling around the 50-day MA as investors
entered a state of quandary over a Congress that puts its partisan agendas ahead
of its constitutional duties, thus resulting in a government shutdown. That caused
my weekly outlook arrow to retreat to a cautionary yellow. The later rise back above
later restored all arrows to green. Then the price took a hit when the house speaker
indicated he could not get his party’s caucus to agree on a bill to allow the resumption
of spending and a raising of the debt limit. Then it rebounded strongly when it appeared
an agreement was at hand. The rise kept going after the bill became law. The gains
continued for a few weeks before the price entered what was essentially a plateau
with a few chops each way during which my outlook arrows were mostly yellow.
The moves on November 8 and the days following turned my outlook arrows green.
After interruptions following mid-month and during the turn into December, they have
all again been restored to green.
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