Major averages finished yesterday mostly lower in the bottom half of their trading ranges on mixed volume, though the Dow Industrials managed to eek out a small gain. A consolidation of recent gains is natural as the indices such as the S&P 500 were getting a bit too far above their 10-day moving averages. An initial gap-up move in oil stocks after non-OPEC members agreed over the weekend to their own production cut faded into the close with many oil stocks reversing on heavy volume.
When the Federal Reserve meets over the next two days, analysts suggest Yellen may argue the economy has made tremendous progress as the unemployment rate is as low as it was in 2007 before the market crash, but sluggish wage growth remains a concern. Average hourly earnings fell unexpectedly in November, bringing down the yearly rate of wages to 2.5% from 2.8% in October. Yellen is also likely to take a wait-and-see approach to Trump’s fiscal plans which are clearly stimulative to the economy.
While December tends to be a seasonally strong month, keep in mind that in both 2014 and 2015, December had two minor corrections. In addition, strong long set-ups are far and few between, which makes taking new positions ahead of the year-end more problematic, and requires instituting tight risk-management.
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