[Chart courtesy of MarketWatch.com]

1. Moving the markets

Again, the futures pointed to a positive beginning in the cash markets, and that’s exactly how it opened. While the major indexes spiked early on, they faded throughout the session but managed to close in the green, though by a only small margin.

After the drubbing of the past couple of days, SmallCaps found renewed momentum and surged +1.15% outperforming the major indexes. Vaccine optimism and additional stimulus was the driving force to higher prices.

The stimulus saga continues full force with CNBC calling it this way:

The Senate currently has no plans to vote on a bill that would increase checks to $2,000 from $600. That measure was passed by the House late Monday. However, Senate Majority Leader Mitch McConnell introduced another bill that ties the increased payments to demands from President Donald Trump on tech and the election.

The US Dollar took another hit and continued its race to the bottom, wherever that might be, in the process giving an assist to gold, which rallied +0.78% but fell short of reaching its $1,900 level.

If you are a follower of the financial news, you undoubtedly will have come across the jargon the professionals use, but you may not have been clear on its true meaning. One investment chief allowed the Institutional Investor to publish it under the heading:

“Asset Managers BS—Decoded,” presented tongue in cheek.

• Now is a good entry point = Sorry, we are in a drawdown
• We have a high Sharpe ratio = We don’t make much money
• We have never lost money = We have never made money
• We have a great back test = We are going to lose money after we take your money
• We have a proprietary sourcing approach = We invest in whatever our hedge fund friends do
• We are not in crowded positions = We missed all the best-performing stocks
• We are not correlated = We are underperforming while the market keeps going up
• We invest in unique uncorrelated assets = We have an illiquid portfolio which can’t be valued and will suspend soon
• We are soft closing the fund = We want to raise as much money as we can right now
• We are hard closing the fund = We are definitely open for you
• We are not responsible for the bad track record at our prior firm = We lost money but are blaming all our ex-colleagues
• We have a bottom-up approach = We have no idea what markets are going to do
• We have a top-down process = We think we know what markets will do but really who does?
• The markets had a temporary mark-to-market loss = Our fundamental analysis was wrong, and we don’t know why we lost money
• We don’t believe in stop-loss limits = We have no risk management

Tomorrow’s last session of 2020 will be an abbreviated one, and I will not write a commentary. Just like you, I will enjoy some time off and will return on Monday refreshed and eager to deal with next year’s issues.

Happy New Year!

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[Chart courtesy of MarketWatch.com]

1. Moving the markets

Despite the futures spiking into record territory, and the cash markets following suit at the opening, the major indexes ended up sliding lower, chopped around their respective trendlines, but fell short in their attempt to rebound into the green.

Taking the starch out of the early dash was the continued battle over the stimulus package with some Representatives favoring the increased direct payment to Americans of $2,000 from the previous $600, while others opposed it. The tug-of-war will go on until the deciding votes are cast.

The clubbing of Small- and MidCaps continued, while the Dow and S&P 500 held up the best. The most shorted stocks, which had been relentlessly squeezed higher for most of the year, finally got hammered over the past few sessions.

Gold in the end managed a green close but fell short of reaching its $1,900 marker. The bullish equity theme remains in full force, despite current weakness, as the driver of this magic rally has not shown any signs of slowing down—yet:

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[Chart courtesy of MarketWatch.com]

1. Moving the markets

Global stocks and US equity futures leaped as a result of Trump signing the $2.3 trillion spending package, while euphoria reigned supreme in the UK, as a last-minute trade deal with the EU was signed.

Here’s CNBC:

Trump signed a $900 billion Covid-19 relief bill into law, averting a government shutdown and extending unemployment benefits to millions of Americans. The signing came days after Trump suggested he would veto the legislation, demanding $2,000 direct payments to Americans, instead of $600. The House is expected to vote on a $2,000 direct payment on Monday, but the GOP-led Senate is not expected to push it through.

This added encouragement to the Wall Street crowd, as it now appears that the current rally may have legs and could continue into the near future. The reason is, as analyst Tom Essaye pointed out, that the main support pillars are still in place, namely Federal Stimulus, FOMC stimulus, vaccine rollout, a divided government, and no double-dip recession, although I beg to differ on the last point.

Still, the rally predominantly included the major indexes, while the recent performance darlings, Small- and MidCaps, took a breather and gave back some of their latest sharp gains.

The US Dollar index rose for a change, while gold, after an early bounce towards the $1,900 level, ended up giving it all back.  

As I keep posting, nothing makes sense, especially the markets pumping while underlying Macro Data are dumping, as Bloomberg points to in this chart:

Makes me wonder how long this can go on before the jaws of reality finally snap shut.

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[Chart courtesy of MarketWatch.com]

1. Moving the markets

The futures already whipsawed on Trump’s decision to return the stimulus bill to Congress, as it contained billions in unacceptable pork expenditures. The initial drop quickly reversed and, by the time the regular session opened, the major indexes were already in rally mode, except for the Nasdaq, which lagged all day.

However, a dive into the close pushed the tech sector into the red, but the Dow and S&P managed to hang on to some modest increases along with SmallCaps.

The Dollar index fell, US bond yields rose, and gold finally eked out a gain of +0.34%

Economic indicators were mixed with New Home Sales puking by 11% MoM in November, Durable Goods orders surging back into the green for the year, and Initial Jobless Claims improving to ONLY 803k new filings, which is down from the prior month’s upwardly revised 892k. Be that as it may, it does not represent an economy in recovery mode.

Adding all the econ data up, ZH seems to agree:

Core Durable Goods miss, Personal Income and Spending miss and drop, UMich Sentiment miss and drop, total jobless claims remain above 20 million, and new home sales miss and drop… all sending hard and soft macro data plunging…

And this chart by Bloomberg confirms it.

Tomorrow will be a short trading day with the markets closing at 10 am PST. I will be out for the rest of this week and will return on Monday with the latest market commentary.

Merry Christmas to you.

Ulli…

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[Chart courtesy of MarketWatch.com]

1. Moving the markets

For the 3^rd day in a row, the S&P 500 meandered aimlessly and ended up in red territory again but by a modest amount. Even the arrival and passing of the long-awaited Covid stimulus deal could not generate any buying enthusiasm for the major indexes.

However, the Nasdaq bucked the trend, but was easily outperformed by Small- and Midcap ETFs with gains of +1.86% and +1.01% respectively. Consumer confidence tumbled to 4-month lows and banks were a hindrance for the Dow.

The focus today was on the $900 billion pandemic aid bundle, which was attached to a $1.4 trillion package to keep the government funded through September 30^th. Trump is expected to sign it into law within a few days. Unfortunately, the entire deal contains a lot of pork, as ZH outlines in this post.

The sour mood in the markets was a result of more bad news about a new virus strain, which so far has shut down and isolated the UK from most of the world. Many European countries enacted severe travel restrictions on visitors from the UK and some trade shipments have been interrupted.

Bond yields went sideways, but the US Dollar Index found some strength, thereby preventing gold from staging a rebound.

I expect similar action on reduced volume not only tomorrow but also during the abbreviated session on Thursday.

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[Chart courtesy of MarketWatch.com]

1. Moving the markets

An early 400-point drop in the Dow, caused by fears about a new Covid strain, created a deep hole for the markets but, as if by magic, a sudden turnaround materialized. The major indexes reversed with the Dow completing a trading range of some 800 points.

It appears that the $900 billion agreed upon stimulus bill lent a huge assist, yet it punished the US Dollar, which had spiked on the early equity drop, but ended up wiping out most of its early gains.

This volatility carried over into bond land, where the 10-year yield first fell and then spiked. Of course, Steve Mnuchin’s “calming the market appearance” on CNBC, during which he uttered nothing new, was enough to stimulate a buying stampede shifting the computer algos into overdrive.

Equities also received indirect support from a rallying banking sector due to the Fed allowing banks to again engage in buyback activities after a recent stress test.

In the end, it was only the Dow which managed to crawl back above its unchanged line for the day but given the magnitude of the early dump, the losses were moderate for the day. Gold pumped overnight but was not able to hang on to those initial gains.

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