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Wall Street’s Best Investments 799

Most of our contributors remain bullish for now, and are still finding pockets of opportunities for our subscribers. We begin this issue with our Spotlight Stock, a company that is steeped in a variety of technology channels, including some very disruptive technologies that I discuss further in my Feature.

Wall Street’s Best Investments 799

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Market Views

Risk is Increasing

Taking a look at the internal condition of the U.S. stock market, we see a marked difference from a month ago. Then strength was near monotonic, with all the ducks neatly arrayed in a row. Today we see a large number of divergences. First off, the NYSE advance–decline line has been flat for over a month while the indices marched on to new highs. While this sort of divergence is not a sell signal by itself, it is always an alert. In addition, the a-d line for the Russell 2000, smaller stocks, has actually turned down. (The Russell indices and their advance–decline lines were recently added to our market timing chart pack.) New lows are starting to build up and volatility expectations as witnessed by the VIX are historically low. Finally, we have gotten five modified Hindenburg Omen signals recently. All of which suggests a market in which risk is increasing; not necessarily an imminent decline, but definitely increased risk.

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John Bollinger, The Bollinger Band Letter, www.bollingerbands.com, 310-798-8855, November 11, 2017

Positive in Intermediate Term

Market breadth is not mixed. It is negative. There has been a distinct lack of positive breadth on this most recent rally, and so both breadth oscillators have remained on sell signals since late October.

Volatility indices remain low and thus in a benign spot for stocks. Stocks can continue to rise, even though $VIX is extremely overbought (at or below 10).

Until $SPX breaks support or $VIX breaks out to the upside, the intermediate-term outlook will remain positive. Other sell signals and overbought conditions give compelling arguments for a short-term pullback, which has had trouble materializing, but whose probabilities are still high.
Lawrence G. McMillan, The Option Strategist, www.optionstrategist.com, 973-328-1303, November 10, 2017

Status Quo, But be Ready

While of course open-minded to a correction that’s broader (how can one not be after such a move), there has been no reason to chase prices; and no reason to short the market either.

It’s been tense; features rolling corrections in sectors; and is led by an incredibly narrow universe of stocks. But just to have held on has been the best approach (with some lightening on spikes of course, but no broad-based liquidations) and avoided being chopped up like so many hedge funds, commodity trading types, and pundits chasing after a slew of expensive stocks; a great many of which are well off their highs now.

For now, ‘caveat emptor’ persists; but not an aggressive bearish bias. That’s not in the picture for the moment; though correction risk remains; and nasty if by-chance an exogenous event occurs.
Gene Inger, The Inger Letter, www.ingerletter.com, November 13, 2017


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THE NEXT Wall Street’s Best Investments WILL BE PUBLISHED December 20, 2017
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