Date: December 28, 2016

Well, Well, Well Mr. Bear

Wednesday was definitely an interesting day as opening strength was immediately sold and built upon throughout the day. That behavior is not only out of character for the post-election rally, it certainly is as well for the final few days with prices so extended. Market internals were pretty much as expected for a day like that and the Dow held up much better than the other major indices. Except for gold, sector weakness was across the board. Treasuries got a bid and I am sure somewhere, people will say that it was a flight to quality. I doubt it.

The big question now is, was this a one day wonder and chance for the bulls to buy the dip for a rally into the new Year or has something changed. I don’t have strong conviction on that just yet. I would like to see how stocks close on Thursday. If all is well, the bulls should rock and roll during the afternoon, especially into the close. However, if anticipated early strength is sold and the bears make some noise during the last hour, stocks will likely see their largest pullback since election day, which really isn’t saying very much. One thing I feel strongly about is that stocks should not fall apart from here. Although bears do, bulls don’t die easily.

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Paul Schatz, President, Heritage Capital