Tale of two markets......

Since election, we have clearly seen outperform by many stocks and under perform by an equal number, even indices are giving us same picture, here is RSI to illustrate my point :

Dow        79.04

XLF        68.63

S&P 500 67.51

RUT       64.03

SOX      61.68

Nasdaq  59.88

Out of the six index, first 3 have outperformed and last 3 are laggard.

As we are approaching Christmas and new year rally, it is important to factor these in your investing / trading strategies.

We do have room to rally into new year, but a sobering picture may emerge as we approach inauguration.

Currently many well known indicators are flashing caution and serious overbought conditions, they are :

Put call ratio most overbought in 2 years

Active investment managers ( NAAIM )  are most bullish , that indicator is @ all time high

Individual investors ( AAII ) are very bullish

Despite above alarming stat, we should rally into new year, as new money is allocated towards equities, this frenzied allocation into year end and start of new year may make a "top in this market "

Chinese stocks are faltering lately, they are lacking investors focus, may be a good long term buy to offset coming top.

In any emerging top in market, it may be a very good trading market, or even daytrading market.

As we run towards series of new all time highs, try to book profit and reduce exposure to a neutral level.

This rally has caught many by surprise, thus a tendency to play catch up, when it is all allocated for 2017, then it is time to reduce exposure or buy laggards.

As we are racing higher and higher, some stocks are trading near lows or making new 52 wk lows, sifting through them and buying, will create a balance in your portfolio.

I know, its lot to decipher and think about, but we may have 4 weeks of good market to deal with it.

December 27th is the last day to book gains or losses for 2016.

BLOG does NOT give buy or sell.

Saleem

Posted in: Mixed