End of Year Outlook

The US Dollar ($uup) looks solid and ought to proceed with higher while US Treasuries ($tlt) stay in an uptrend however the inversion warning is running up the flagpole. In the outside businesses the Shanghai Composite ($fxi) is extremely solid and ought to proceed with higher with Emerging Markets ($eem) attempting to switch higher and the German DAX ($ewg) taking a gander at a potential inversion lower.

Unpredictability ($vxx) to stay low with the VIX in an extent somewhere around 10 and 18. The perplexity from falling Oil and Gold yet with a climbing Dollar and Treasuries is reflected in the Equity markets. That vulnerability sees the $spy and $qqq proceeding in their uptrends, however with a bit of alert on the SPY, while the $iwm proceeds with its union that began the year.


The January Effect

December is turning out to be the last demonstration of a robust year for stocks. The S&p 500 is up more thank 10% as of now. Shares of little organizations are of exceptional enthusiasm since they’ve been skipping once more in the wake of slacking. The Russell 2000 list of little stocks is up 0.7% in the not so distant future, getting go into the dark in the wake of being pulverized in the October swoon. In any case since October, little tops have been dashing back, making some miracle if December is their month to shimmer.

Brokers are loving December since little stocks not just have a tendency to beat the huge gentlemen through January, however the time of outperformance is revving up in the last month of the year. The Russell 2000 has picked up 4.7% between Dec. 15 and January 31 generally speaking in the course of recent years, says the Stock Trader’s Almanac. That effectively beat the 2.7% normal addition of the huge organization centered Russell 1000 amid the same period.


Seasonal Investing

December is the number one S&P 500 month and second best for DJIA since 1950, averaging gains of 1.7% on each index. It’s also the top Russell 1000 and Russell 2000 (1979) month and second best for NASDAQ (1971). Rarely does the market fall precipitously in December. In midterm years, December’s rankings slip modestly, but average gains remain inline. The “January Effect” of small-cap outperformance starts early in mid-December. Wall Street’s only “Free Lunch” of distressed small- and micro-cap stocks making new 52-week lows on December Triple-Witching Friday will be served before the opening bell on December 22. Santa’s Rally begins on Wednesday December 24 and lasts until the second trading day of the New Year. S&P has averaged gains of 1.5% since 1969. In years when Santa Claus did not come to Wall Street, bear markets or sizable corrections have often materialized in the coming year.


Credit Markets

One of the best indicators this year in raising the red flag before a pullback has been the junk bond (AKA: high yield) market. Shown below is the Barclays U.S. Corporate High Yield Average Option Adjusted Spread (OAS) inverted for directional similarity along with the S&P 500. The OAS spread began to tick higher before the June/July and the Sept/Oct pullbacks as seen by the yellow highlighted boxes. Currently we are seeing the OAS spread tick higher again, warning that the markets latest advance into new high territory is upon shaky ground.

High Yield OAS
Source: Bloomberg

Other signals echoing caution are credit default swaps (CDS) on investment grade (blue line below) and high yield (red line) corporate bonds shown below in the bottom panel, inverted. You can see that whenever there is a divergence with corporate bond CDS and the S&P 500 over the last year the S&P 500 tends to play catch up within a few days or weeks. Like the OAS spread, the CDS on corporate bonds is heading higher (lower in chart) and suggests we could see a bout of profit taking in the stock market.




The Euro Crisis, The Flash Crash, The U.S. Debt Downgrade, The Fiscal Cliff, The Sequester, Cyprus.   What do all of these media spectacles have in common over the last 5 years?  They were all fabulous buying opportunities for stocks.  In each case, stocks plunged initially as traders were scared enough to sell, only to recover and rally.  If we’ve learned anything since the financial crisis in 2008, its that any sell-off should be bought.  With zero interest rate policy set to remain in effect for years to come,  a mere $10 billion reduction per month of asset purchases by the FED TBA next month aka the terrible taper, and central banks globally printing money, stocks remain the place to be going forward.



Day Trading

When someone says day trading, he/she means buying and selling stock within the same day. To understand fundamentals of day trading, consider yourself a merchant in the market and by the end of the day you have to re position yourself with no stocks.

What does a day trader do?

Day trader performs the following tasks:1. Trade for stocks several times a day thus squiring a fraction of profit. The only compulsion is by the end of the day traders have to close all their position.2. Day trader usually capitalizes movement of money within one trading day.3. Day trader have a different role than investor, investor invest money for long time whereas day traders have to trade within hours, minutes and even seconds.

Why day trading?There are several advantages of being a day trader.1. Increased Leverage – Greater leverage on trading capital due to low margin requirement. 2. No Overnight risk – Since trading closes the same day, next day events do not affect you.3. Market Direction Profit – Make best use of fast declining markets and use it when prices are high.

Day trading is difficult to master but with the appropriate techniques and skill a day trader can make good margin.




Mutual Fund

Mutual Funds are a collection of investments under one umbrella which is managed by a professional. These investments can be anything from stocks, commodities to bonds and money market securities. There are many types of Mutual Funds as everyone has a different goal and investment strategy. Mutual Funds can be considered as a form of diversification since different investment vehicles are used in different sectors of the economy. For example, one mutual fund may specialize in technology stocks while another mutual fund may focus on small capitalization stocks. Of course, some Mutual Funds are riskier than others; depending on what percentage of the investments are spread out in which industries. As a service for professional stock selection and management, mutual fund companies charge expense fees, as a percentage of your capital invested. Also, load fees are sometimes imposed when you first invest or when you cash out. These load fees are designed to discourage active trading of mutual funds. With the advent of Exchange Traded Funds (ETF’s), mutual funds have lost a little popularity, but they are still useful for Buy and Hold investors. Learn more about the benefits of Exchange Traded Funds. As of today, there is approximately $25 trillion dollars invested in Mutual Funds around the world.



A basic material used in manufacturing or commerce that is interchangeable with other the same commodities coming from a different source.  The quality of a specific commodity may differ slightly, but it is essentially uniform across producers. When they are traded on an exchange, commodities must also meet specified minimum standards, also known as a basis grade.  Common types of commodities are corn, gold, oranges, wheat, silver, steel, etc.