No Institutional Selling Detected Last Week

No institutional selling was detected by the TICK chart last week. This is an important fact as it applies to your trading psychology.

TICK chart of last Thursday's sell off

The TICK chart above is through the close of last Thursday and the big sell off on that day. Notice that the -167 at the close is consistent with normal retail trader activity. If institutional traders were selling last Thursday, the reading would have been below -700. The TICK suggests that you should be cautious about going long anything right now but not outright bearish.

I think we need to continue to screen for our favorite chart patterns and build a small list of stocks that you are ready to go long as soon as the major indices show more of a consolidation pattern.

Black Friday Hits All-Time Record of $3.34 Billion

Black Friday sales hit an all-time high record of $3.34 billion or 21.6% growth year-over-year. Mobile accounted for $1.2 billion of those sales, a 33% increase from the previous year. TechCrunch writes

Combined with yesterday’s $1.93 in online sales on Thanksgiving, the two days are expected to close out at nearly $5 billion in sales. Top-selling toys included Lego Creator Sets, electric scooters from Razor, Nerf Guns, DJI Phantom Drones, and Barbie Dreamhouse.

The Doctor Of Common Sense says about the major indices hitting all-time highs, “Do you believe that this is a coincidence? I’ve been telling you everything that liberals do their whole policy with their communist and social policies, they never work. All you have to do is look at how bullish the market is.” The Doctor Of Common Sense also uses Black Friday’s record sales as proof of failed Democrat and liberal policies although he fails to logically back that claim up. Check out what Doctor Common Sense has to say in the video below.

Nothing against The Doctor Of Common Sense but this is what I was afraid of. When everyone is coming out declaring how great Trump is and how bad liberals have been and citing the spike up in the stock market as proof, that’s when the market is most likely to take a turn down IMO.

This Trump Rally is mostly nonsense and hype IMO. Trump hasn’t even taken office yet. The P/E on the S&P 500 has moved higher since the election and is not supported by anything fundamental.

On the chart above, the gold line is the P/E ratio of the S&P 500 which is at a troubling high of 25.46. The red line is earnings, and the blue line is the S&P 500.

If you thought the market was overvalued before the Trump election, you must be freaking out over this latest spike up.

The stock market going up is not proof of failure by Obama and Democrats. The stock market is going up because there are more buyers than sellers and from short covering. From a market psychology perspective, greed is prevailing over fear right now. That’s it. Assigning stock market direction as proof to justify your personal political bias will result in the rapid demise of your trading account.

Don’t get me wrong; I’m a Trump supporter as you already know. But let’s be real about market valuations. Chasing markets higher because of Trump mania is a dangerous game IMO. I think a lot of amateur traders and investors have the potential to get hurt from this Trump rally when it finally comes to an end.

Positive Surprise Economic Data Raises Rate Hike Outlook By Year End

Last week was a big week for trader psychology with multiple economic reports showing the US economy was not in free fall. The Fed Funds Futures market is pricing in a 43.3% probability of a rate hike by December 14, 2016.

Below is a quick breakdown of the better than expected economic reports last week.

US retail sales jumped more than expected.

I was not included in the Reuters polling, but I would have estimated 0.1 too.

What this means is that many traders realized they were a little too bearish after the crash of the May jobs report to 11K.

Retail sales including food services, excluding motor vehicle and parts, also crushed expectations to the upside.

Once again polling data showed that traders were a lot more bearish than was warranted.

Just when you think we have a pattern of good numbers, a big negative number messes with the pattern and keeps us all on our toes. Check out how weak the clothing and apparel component of the retail sales report is.

The CPI is finally moving higher, and it looks like we have a confirmed uptrend.

Core CPI rose perfectly in line with expectations, coming in above the Fed’s target of 2%. The Fed Funds Futures market immediately jumped from a 37% to 43.3% probability of a rate hike by December 14, 2016.

The only reason why the core CPI was not up more was that energy services pulled the number down. If we remove energy from the equation, the CPI would be up nearly 3.2%.

The CPI less energy services chart above suggests that once energy services deflation eases, we could see a rapid surge in the core CPI number. How much should the Fed let the Saudi Arabia attack against US oil producers impact their rate hike schedule? The Federal Reserve doesn’t want to wait too long to increase rates thinking that inflation is lower than what it is.

The Atlanta Fed’s Wage Growth Tracker shows wages rising +3.6% year over year. That’s a nice improvement in pay. The Fed watches this indicator very closely.

In light of last week’s economic reports, I think we can’t be so bearish on the economy. We are still in the worst six months of the year, and the stock market could crash anytime between now and the end of October. However, we are not as close to the edge of the recession cliff as we seemed to be on June 3, 2016, when the horrible May jobs report was released.

A big part of profitable trading is psychology and shifting with the economic data when it surprises to either the upside or the downside.