New market thoughts from Raymond James’ Jeff Saut: “December Low of 24,140.91” 01/04/18

“In your December 26 article you mentioned that Lucien told you to pay attention to the ‘the lowest closing price during the month of December.’ You went on to say that the low for December was the print low of 23921. That was not the closing low that day, the closing low was 24231. By my measure the closing low for the month occurred on 12/06 at 24140. Is it the print low or the closing low?”
. . . An astute Raymond James financial advisor
If you publish often you are going make mistakes from time to time. That was the case in last Tuesday’s “Morning Tack” when we wrote, “For the record, 2017’s December closing low was 24180.64, recorded on 12/5/17.” As a number of Raymond James’ financial advisors were quick to point out, that was not the December “closing” low. Indeed, the December “closing” low came the next day (12/6/17) with a price of 24140.91. So we stand corrected, and will be watching that low in the first quarter to make certain it is not violated, in accordance with Lucien Hooper’s December Low Indicator. Our sense is it will not be violated as the secular bull market extends on the upside. As Andrew Adams pointed out yesterday:
“The bulls appear to have history on their side, too, considering that the year following the 32 other 20% total return years in the S&P 500 since 1928 saw an average gain of 10.46% (median 12.80%), with only one finishing with a loss of more than 10% (1937). Moreover, we have compared our current market to the mid-1990s for the last two years, and the closest comparison to 2017 from a drawdown perspective actually ended up being 1995, with ~3% max losses in the S&P 500 during both years. That seems to be good news since 1996 turned out to be a pretty good year, with about a 20% total return and only an 8% max drawdown.”
In addition, we will repeat a comment from Sam Stovall (Bob Stovall’s son, who was the keeper of the GM Indicator in an era gone by), who wrote this back in February 2017:
“Since 1945, there have been 27 years when the S&P has achieved gains in January and February. The stock index then finished up for the year (on a total-return basis) in every one those years, according to Sam Stovall. That’s going 27 for 27, or batting a thousand. The average rise in those years was 24% …and the gauge was up further in the remaining 10 months 25 of 27 times.”
So, based on the past two sessions we got a marginal Santa rally; and, the first week of January is shaping up for a positive January Barometer reading as well. Accordingly, if the senior index can rally in January and February it is likely Sam Stovall’s quote will be in-play and the December Low Indicator will be a non-plus. We remain bullishly configured with a tilt toward commodity-centric stocks given recent developments, including the under-loved midstream MLPs, which have leaped off of their recent lows (see chart on page 1). This morning the preopening S&P 500 futures are better by about 3 points as we write at 5:00 a.m. It feels like the equity markets are beginning a whole new leg to the upside.

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