Another week, another failure to break 20,000.
I would be very surprised if the Dow broke 20K this week as well. With the rising headlines about the event risk surrounding the inauguration, the market should not be especially bullish. What would be the point of buying a top in the market ahead of what ISIS is calling "Bloody Friday?" They are calling on every follower to be creative in their methods of attack but try to inflict as much damage as possible.
The 35,000 person security force plus 7,500 national guard members have been running drills to combat and react to every conceivable threat from truck crashes to car bombs to drones carrying explosives or biotech weapons. I may just be really paranoid but I can think of a lot of places I would rather be than jammed in with a million other viewers into the biggest terrorist bull's-eye of the year in 40 degree weather. I will have a much better seat in front of my big screen TV at a comfortable 70 degrees.
The market has not seemed to care that the event is approaching. The Nasdaq continues to set new highs and the Dow continues to trade sideways. The S&P is also in a sideways pattern but the recent candles are clustered at resistance suggesting it wants to break out. The A/D line is rising and were it not for the event risk I would be buying index calls at the current level.
The Dow pattern is not negative but there is no excitement. The A/D line is declining thanks to nearly one-third of the Dow components being downgraded last week. Despite that, the index just keeps moving sideways. Dips are bought and rallies are sold. The Dow is just passing time until a headline impacts the market. There are five Dow components reporting earnings this week. Goldman Sachs on Wednesday and IBM on Thursday will be the big movers.
The Nasdaq closed at a new high and has been up on 8 of the last 9 days. This run should be about over as some highly volatile tech stocks begin to report. Netflix is Wednesday after the close. Disappointments from the big names can turn into a wet blanket for the rally. The index is up more than 200 points in the last 9 days. It is time for a rest.
The Russell 2000 looks like the Dow with a narrow range and no direction. However, the Russell candles are clustered near support rather than resistance and the opposite of the S&P. The A/D line on the Russell is also at a six-week low so there is some internal weakness.
The earnings calendar is weighted to Wed/Thr and there are some big names. That will give traders something to do before they close up shop on Friday morning. Volume Friday should be very low with all eyes glued to the inauguration.
The most important economic reports are the Fed Beige Book on Wednesday and the Philly Fed Manufacturing Survey on Thursday. Unless there are significant deviations from the expectations, they will be ignored.
In reality there will probably be too much security surrounding the event and terrorists are probably going to pass. Even if they were willing to die for their cause, they would rather go out with a bang in a crowd of people rather than stopped at a security checkpoint. At least that would be my thought process. There will be a lot of events in the future with little or no security that could be softer targets. The inauguration will be a hard target but not an impossible target.
Regardless of whether you are worried about a disaster or not, I seriously doubt it will impact your financial future by waiting until next Monday to enter the market. It could however, cause a serious blow to your account if a 9/11 type of mass casualty attack appeared. The case for waiting until Monday is stronger than the case for plunging into new positions just because the market is open.
The S&P futures are down -4 on Sunday evening on a decline in the Asian markets and expectations for a drop in the European markets after the pound crashed on comments the UK is planning to make a hard break from the EU.
The End of Year Subscription Special will close at midnight on Monday. That will give all the remaining procrastinators plenty of time to get their tax-deductible subscription for 2017.
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