Quiet Before the Storm

A short note this week as not much caught my eye and I am travelling. I even snuck in a golf game yesterday with my brother at his excellent home track, Uplands, in Victoria B.C. Love this place! Next week I promise to work harder as I recap my past blog hits and misses of 2017.

As markets drift ever upward in a vacuum of selling and year end window dressing, investors seem complacent and happy. The angst that proceeded many of the major events of the year has been replaced by a quiet resignation that reflects a mood of grudging acceptance that the bull market is still intact.

Even yours truly has been guilty this year of crying about potential falling skies that were simply speed bumps on the road to record highs. Korea, Brexit and even Trump seem to be spent forces as negative catalysts.

Can it be that the individual investor can finally be comfortable getting fully involved in the market ten years after the financial crisis? Can the bull market last much longer? Will the Leafs and Raptors make it 4 for 4 in the quest for Toronto sports champions? The year 2018 looms large.

The coming 12 months will be a test of wills between the central bankers and the secular deflation forces that have suppressed yields. Central bankers will have to do some fancy footwork to safely navigate these issues over the next year as they normalize policy. The fate of the bull market hangs in the balance and it is far from certain that they are up to the task.

But that is next years' problem. For now the Risk Model says stay with it and I will dutifully obey.

Risk Model: 3/5 Risk On

The Sentiment gauge from AAII dropped off but was replaced by an benign VIX reading. We are not able to work off the RSI overbought here with the bounce back in the market last week, so a low risk entry point remain elusive. FANG and other Momentum factor stocks regained their bids quickly following yet another head fake sell-off last week. Hard to trade this market so I'm just sticking with it.