Market Notes (4:30pm ET): The Santa rally continues not only on light volume but on a wing and a prayer. Today, the volatility index (VIX) dipped below the bullish contrarian level of 12 showing a high level of investor complacency. This is a contrarian indication that the market is becoming overbought thus increasing the probability of a correction. Also, the fact that the P/E (price/earnings ratio) on the S&P is nearly 35% above its historical average shows that there are few bargains left.
One of the few areas left where good value can still be found is in the shipping stocks. This industry group--a member of the transportation sector--has been staging a stealth rally for several months. A few days ago the Shipping etf (NYSEARCA:SEA) broke out of a four month consolidation pattern to jump to a new yearly high on heavy volume. Two major players in this space that are actively traded in the US are Dryships (DRYS, $4.70; +13% today; P/E = -5.5) and Navios Maritime (NM, $11.41; +11% today; P/E = 10). Both of these jumped to new yearly highs on very strong volume, an indication that investors are piling in. Of the two, only Navios pays a dividend--2.1% which is on par with its peers. If we are to believe that the global economy is on the mend, then it's reasonable to expect the performance of the marine shipping group to continue to improve.
Full speed ahead!