The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Will they or won’t they?
US futures were slightly bid in the premarket and the S&P opened about +20. It then drifted to flat by 10:30 AM and treaded water until 11 AM. At that point, the index rallied strongly about 80 points. New York Fed Reserve President, John Williams said that he saw room for Fed policy to ease in the near term. Markets took that as a sign that a 25-bip cut would indeed arrive in December. Fed Funds futures now price a 25-bip cut with 66% probability. This is a
Significant move from the 30% markets priced just two sessions ago. The stock market rally was broad and powerful. Treasury yields fell small across the curve and while trouble continues in Bitcoin, it didn’t spillover to stocks today.
It appears that the Fed is signaling that they will be helpful to the longs on December 10th. The usual dip-buyers saw that as a beautiful opportunity and away we went. The S&P bounced off of the 100 day moving average (6548) and it remains below the 50-day (6712). The index is also 4% below the all-time high (6920). The long-term chart remains very bullish and the overall economic environment seems stable and growing.
You put all this together and the longs are sitting pretty again. As long as some new headline doesn’t ruin the party, yesterday and today looks like the local bottom. If the weekend allows nerves to settle, I expect the usual bulls to pull out the usual playbook and we will head towards new highs in the runup to the FOMC decision.
Bitcoin may still represent a risk to US stocks but some *material* link between the markets would have to hit the headlines. If stock markets worried about Bitcoin, it was because of the worry of an unknown and large connection. We’ve not seen any news like that. The result is that stock investors are presuming that there is no link. Bitcoin problems are not spilling over psychologically anymore. Everything changes if a true link comes to light… but until then, expect the stock market to be indifferent to the crypto market.
See you Monday, have a great weekend.
-Mike
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