Only 3 Days Over 11K?

Not much in the news today as the Dow and the broader market decided to take the day off with regard to the rally. We continue to report that the momentum indicators are overbought and that, by itself, is reason for caution. This pullback was well contained today but it brought the Dow back under the magic 11K figure we have seen the last three days.

We mentioned the trade gap report in the last post but wanted to review that data point. The main issue is the oil. The average price of a barrel of crude was 52.16 in November having fallen 7.3% from the October. Fast forward to today when the price is right around $64 and you can see where the trade gap / deficit is going.

The other issue is the size of the deficit. I guess when you’re talking about $60 billion another $4 or $5 billion really doesn’t matter but… the trade deficit over the past three months has been the highest ever. November’s number, from Thursday morning, was $64.2 billion, in third place to October’s world record of $68.1 billion and September’s number of $66 billion. You can probably start to envision what that number will be for December and now January with the price of oil so high.

Friday the 13th we get the Producer Price Index (PPI) for December and expectations are for a bounce back from the last month’s -0.7% to a much more positive number of 0.5%. But, don’t forget that depending on which way things go, we probably will need to consider seriously the PPI ex-food and energy because they’re so volatile. (Do you hear the sarcasm?)

We’re not sure what could drive the market in either direction and with a huge PPI, the market might decide it doesn’t like the idea because the Fed may not be able to slow its rate hikes. We don’t think there are too many dreary ideas like that to move the market. The slowing rate hikes news has run its course for the time being but not much else has that kind of media attention to move the market. We are still bearish and particularly against Wednesday’s highs in all indexes.

Dow Industrials: 10,962.36 -81.08
RYVNX: 17.20
RYAIX: 21.04
TLT: 91.50
BEGBX: 13.32