STTG Market Recap January 8, 2013

Stocks continued to pull back Tuesday but markets came off their worst levels with a late day rally.  Remarkably the S&P 500 is down 8 of the past 11 sessions but since 2 of those sessions were so immense to the upside, the market is up in that time frame.  The S&P 500 fell 0.32% and the NASDAQ 0.23%.

Economic data continues to be light this week although Tuesday marked the release of an interesting consumer debt report.  We’ve seen massive expansion of student debt (the next great bubble) over the past decade, and accelerating since the beginning of the Great Recession and that continues.  Of course many of you know, just like the mortgage market, the federal government has almost completely taken over the student loan market.   And having far “looser” terms for borrowing than the private sector, the obvious results are happening.  Of course many of those people taking out the debt are finding a poor job market and having difficulty paying them back.  Which will be on the back of taxpayers (again):

The Federal Reserve said Tuesday that consumers increased their borrowing in November by $16 billion from October to a seasonally adjusted record of $2.77 trillion. Borrowing that covers autos and student loans increased $15.2 billion. A category that measures credit card debt rose just $817 million.

The sharp difference in the borrowing gains illustrates a broader trend that began during the Great Recession. Four years ago, Americans carried $1.03 trillion in credit card debt, an all-time high. In November, that figure was 16.5 percent lower. At the same time, student loan debt has increased dramatically. The category that includes auto and student loans is 22.8 percent higher than in July 2008.

Looking at the indexes, we continue to see a pullback in the indexes but still not filling the gap created on the first trading day of the year.  The S&P 500 fell out of the very narrow range created the previous 3 days but recovered to get back into it by the close (by a hair):

 

This 4 day consolidation has helped lower the NYSE Oscillator from “very overbought” to “overbought”:

Let’s keep an eye on oil here as we mentioned it could potentially be forming a bullish “inverse head and shoulders” formation but needs to clear its neckline – you can see it has now been twice rejected at that level in the past week, a reason it’s important to understand technical analysis; these ranges are not random.

Also keep an eye on the financials and transports which have been leaders on this advance:

You should notice a difference in the two charts above versus say the technology index which is nowhere near as strong:

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