The American markets are up a bit more than 3.5% since the Paris attacks. They've proven resilient in the face of the geopolitical turmoil and uncertainty that trouble the world today.
The Fed's rate hike is looming out there, and odds are that Yellen & Co. will act to raise rates at the next meeting – or the one after that.
The increasing certainty of a hike isn't going to be a spoiler this month, though; the markets love it when you take uncertainty out of the picture, and an inevitable rate hike has been periodically priced in for more than a year now.
We will see some excitement, though, and some profits, if we trade smartly. So here's what you've really got to watch out for now and through the end of 2015…
Where the Stock Market Goes from Here
I'm convinced the Dow will hit 18,000 any day now, almost certainly before Dec. 31. The markets have been going sideways for a week or so, but the adoption of the yuan as an IMF reserve currency, along with stronger than expected unemployment numbers out of Europe, have prepared the markets to swing for new highs.
But… those highs probably won't last. Now, precisely why they won't stick around is a story for a different day, but it's enough to say that the underlying economic strengths needed for a sustainable rally and bull market just aren't there, and I think we'll see a pullback not long after hitting those highs.
The smart move right now is to tighten up your stops and get ready to take profits when the market does kick over. Consider using some of these investing techniques, too.
That's the bad news.
The good news is that the bad news doesn't really matter. I like to trade stocks, not entire markets, and I'd love to buy these stocks on even the slightest weakness…
What's Driving This Month's Action
Last week, we talked about the creeping weakness in traditional brick-and-mortar retailers, like department stores and clothiers. But it would be a mistake to write off the entire retail sector. There's plenty of money to be made here once you understand how and where it will be made and the forces in play.
This month, it's all about the American consumer.
Importantly, we've seen some of the highest wage growth in a long time in the November reports. Hourly pay grew by 2.6% in the year to October. Paychecks could still be bigger, even a lot bigger – there's a long way to go before wage growth hits that 3.8% we saw in the pre-Crisis year of 2007 – but the American consumer should prove strong into the end of this year and beyond.
To be sure, Americans are still saving at a high rate of more than 5%, but their spending has been strong enough to offset even the Chinese economic slowdown. And it's where they're spending their money that's important to us right now…
About the Author
Nationally recognized technical trader. Background in engineering, system designs, and risk reduction. 26 years in the markets.