A Quiet Week Ahead (DIA, SPY, ETFs)

As we approach the end of 2010, I would like to wish you and your family a very Happy Holiday and healthy, happy and prosperous New Year.  It has beeen my honor and privilege to serve you this year and I look forward to continuing our work together as we face the challenges and opportunities of 2011. 

This will be a shorter than usual letter due to these shorter than usual business weeks but watch for a special New Year's edition next Sunday as we look ahead to the issues and opportunities of the coming year. 

Looking at My Screens

Markets remain overbought and overextended as we head into the last trading week of the year.  14 Day RSI is at 70.41 which is often associated with market tops while stochastics remain overbought, investor sentiment is at extreme levels and the VIX is at extreme lows exhibiting extreme investor complacency.  Numerous red flags are flying as we close out the year. 

The View from 35,000 Feet 

The big news this week was the interest rate hike in China on Christmas Day which went largely unnoticed due to the holiday.  The Euro continued its decline which reflects ongoing concerns with sovereign debt problems there while at home the economic news was mostly positive with durable goods, employment and consumer sentiment all showing improvement last week. 

What It All Means 

Signals continue to be mixed with fundamentals at home being positive and world conditions and technical indicators flashing warnings. 

At Wall Street Sector Selector we remain in the “Yellow Flag” mode, expecting choppy to lower prices ahead.    

The Week Ahead 

Tuesday: October Case/Shiller Home Price Index, December Consumer Confidence 

Thursday: Initial and continuing unemployment claims, December Chicago PMI, November Pending Home Sales 

Sector Spotlight: 

Winners: Home Construction (ITB) Regional Banks (IAT) 

Losers: Spain (EWP) Chile(ECH) 

Wishing you a wonderful week wherever you may be. 

All the best,  

 
John Nyaradi

Wall Street Sector Selector