The past week was a very short one for the stock market, due to holiday closures. Stocks rose almost 1% in Canada. This could be the result of tax loss selling, the deadline for which is now past. The momentum for stocks is positive again, and the signal has turned away from bonds and towards stocks for the first time since Nov 21 (five weeks ago). It’s not a strong signal, but it’s encouraging.
The coming week has only one holiday: markets will be closed on Thursday for New Years Day. This week is likely to tell whether the momentum we are starting to see again for stocks (finally) is really or was simply the result of increased volatility. The following week, for those who are superstitious (aren’t we all, in some way or another?) is often viewed as an indication of the coming year. I expect it to be accurate one time in two.
Chinese stocks (FXI), US small caps (IWM) and large caps (SPY) are the most in favour at the moment. It’s interesting to note that gold and bonds have both fallen over the past two weeks, as one would expect when interest rates and stock prices are rising.