December 30, 2011



January 12, 2018

 

Dear Investors,

The markets appear to be approaching a point of buyers’ capitulation, as the average investor is surrendering reasonable buying principles. Significant mutual fund inflows continue to push the markets higher with late afternoon buying. The last time we saw investor capitulation on the seller side was nine years ago. After a significant sell-off from October 2008, the markets continued to sell off without reason through March of 2009. This time, the markets have surged significantly higher since October. Investors’ “fear of missing out” is driving unreasonable buying, and it is not over yet. This is the best start for the markets since 2003, and is likely to be the best January in history if it continues as projected by technical wave mapping.

The Dow Jones Industrial Average surged more than 500 points for the second consecutive week gaining 507.32 points, or 2.0%, this week to close at 25,803.19, and is up 4.4% this year. The S&P 500 Index surged another 43.09 points, or 1.6%, to finish the week at 2,786.24, and is up 4.2% this year. The NASDAQ Composite jumped 124.50, or 1.7%, to close the week at 7,261.06, and is up 5.2% this year. The Russell 2000 added 31.96 points, or 2.1%, to close this week at 1,591.97, and is up 3.7% this year. The price of gold rose by $18.00 to finish at $1,338.30, and is up 2.5% this year.

Since the end of the third quarter of 2017, the markets have surged more than 15% primarily due to anticipated increased corporate earnings from the new tax law. After the new tax law was passed, many companies announced pay raises and/or increased employee bonuses, which increase corporate expenses. Based on the markets’ reaction, investors are expecting a 40% increase in earnings due to the 40% corporate tax cut. However, increased expenses may disappoint investor expectations. Conversely, increased wages and earnings could be stimulating to the economy overall.

The fourth quarter market surge stimulated the “wealth effect” for the holiday season. Consumer credit soared in the fourth quarter for the first time in years, which could have been the catalyst behind the increased holiday sales. However, overall retail data was similar to that of the prior year. The point is not to be pessimistic, but reasonable in light of the unreasonable market surge. Bubbles are created when reality cannot live up to expectations.

From a technical aspect, the markets are extremely over-bought on a daily and weekly basis with respective relative strength indices in the mid-80’s (70 is the over-bought threshold). There appears to be a major market turning point approaching on or about January 29th, which means that this euphoric rally can continue for another two weeks. It looks as though that could be the start of a correction within wave (4) down that could eventually lead to wave (5 ) up to more all-time highs this spring.

If you would like to know how the new tax law will affect you, please feel free to call or email me. If you are retired or nearing retirement, now is not the time to chase the markets. If you would like to review your portfolio, please contact our office. I encourage you to learn how our B.E.L.I.E.V.E. Wealth Management process can clarify your retirement goals. Our no-obligation consultation could be the first step toward your retirement goal. Is it time for your assets to start working for you instead of you working for your assets? Please call our office or email info@.

Vincent Pallitto, CPA, CFP®   

Summit Asset Management, Inc.



973-301-2360

973-301-2370 Fax

A branch office of, and securities offered through LPL Financial

Member FINRA SIPC

 

You cannot invest directly in a market index, market indices are for benchmark purposes.  The information in this market commentary is obtained from various news sources, and . 

Fibonacci Phi Date (also known as Fibonacci Time Extensions) is a technical indicator used to seek to identify the timing of significant price movement in the market, and is based on the Fibonacci Number Sequence.

The Hindenburg Omen is a combination of technical factors that attempt to measure the health of the NYSE, and by extension, the stock market as a whole.  The goal of the indicator is to signal increased probability of a stock market crash.

The McClellan Oscillator is a market breadth indicator used in technical analysis by financial analysts of the New York Stock Exchange to evaluate the balance between the advancing and declining stocks.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you consult your financial advisor prior to investing.

The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All performance referenced is historical and is no guarantee of future results.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell 3000 index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

The Blue Chip Index is a stock index that tracks the shares of the top-performing publicly traded companies.  These indices are unmanaged, which cannot be invested into directly.

Precious metal investing involves greater fluctuation and potential for losses.

Past performance is no guarantee of future result.

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