The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Bumpy morning.
Overnight was quiet and S&P futures were essentially flat. The index opened down 5 points but lost 40 points shortly thereafter. The index swung around for the first hour before stabilizing around unch’d. Just before lunch, the longs took over and pushed the S&P up into the +40 to +55 range. We stayed there for the rest of the day with a further push late. Yields came in some along the front and belly of the Treasury curve. FOMC cutting probabilities didn’t move much with the December cut priced at 79%.
The turbulence after the open appears to be technical. The 50-day moving average is 6716 and a brief pop after the open took us to 6715. The index turned at that level and dropped 40 points fast. The market obviously thought the S&P just failed below the 50-day moving average and sellers piled on. Sellers were only right for 10-20 minutes before the buyers took control. The tape broke over the 50-day briefly around 10:45 AM and remained over the 50-day from 11:30 AM on.
As the index climbed convincingly over the 50-day, markets calmed and adopted the bull market narrative. The index is up for 3 consecutive sessions and attitudes are improving with every uptick. The Fed looks supportive and White House National Economic Council Director Kevin Hassett is the front-runner for Fed Chairman, a likely dovish influence.
Markets are not perceiving significant risks as we approach Thanksgiving and month-end and so we are climbing. The upside momentum is gathering strength and investors are thinking more about front-running a Christmas rally than worrying about a downside event.
The near-term outlook is very positive. Will a risk pop up and spoil the holiday? I doubt it. So does the market.
I hope we don’t get surprised.
See you tomorrow.
-Mike
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