[Chart courtesy of MarketWatch.com]

1. Moving the markets

Despite the Dow having had its best month since 1987, the last day of November proved to be a downer with the major indexes slumping led by the Dow with the Nasdaq holding up the best.

This pretty much reflects this year’s performance when, despite the hype accompanying the Dow reaching the $30k level, the Nasdaq (QQQ) proved to be far superior by gaining +41.57% vs. the rather meager +3.86% of the Dow.

Opined JJ Kinahan, chief market strategist at TD Ameritrade:

“What’s really taken most people by surprise is that if anybody said to you in March, ‘Hey we’re going to have a year where really most businesses are working at not-full capacity, most restaurants may not even be open, people aren’t going to the office, and oh yeah, by the way, we’ll hit all-time highs,’ people would have thought you were nuts.”

“It’s been amazing.”

Yes, it has been JJ. But let’s not forget that the reason for this levitation has absolutely nothing to do with businesses working at full capacity or not, nor any other fundamentals, but it has everything to do with the $15 trillion rise in global liquidity, as I have posted ad nauseum:

Because, if the reason for the rally had been one of improving fundamentals, we would not have seen the total disconnect between rising global stocks and tumbling bond yields, as Bloomberg shows in this chart. Increased liquidity and collapsing bond yields have made it possible to see stock markets rally in the face of sharply declining economies.

The oddity to me was that, despite the pummeling of the US Dollar, a corresponding rise in gold prices did not occur, which may be temporary but also could be troublesome. In my advisor practice, I have therefore reduced our gold holdings until such time that a new major uptrend can be established.

As far as the upcoming month of December is concerned, uncertainty will reign, and all options are on the table ranging from a melt-up in equities to a collapse. It’s important to have an exit strategy in place, should the latter occur.  

Read More

[Chart courtesy of MarketWatch.com]

1. Moving the markets

As could be expected, trading volumes slowed to a crawl ahead of the Thanksgiving holiday. The Nasdaq finally managed to score a winning session, handily beating the S&P 500, after having lagged over the past few weeks.

On the economic side, things don’t show much improvement with the Labor Department reporting that Initial Jobless Claims rose for the second week at a rate of 778k vs. expected 730k, which was worse than the prior week’s reading of 742k.

Add to this yesterday’s disappointing drop in consumer confidence and today’s mixed sentiment survey, none of which are awe inspiring, which leads me again to the primary reason for having seen the stock market bubble inflate at such a rapid pace, which is represented in this chart:

If it had not been for the creation of some $14 trillion of liquidity over the past few months, the Dow $30k level might only be a wishful number, while the other indexes would be sharply lower.

However, such is the environment we are living in and have to deal with, but I can assure you that this reckless approach to propping up markets, while devaluing the US dollar, will not end well—but it can go one for a while longer.

I will be out on Friday, so there will be no report, but I will post the StatSheet later today and the “ETFs on the Cutline” on Saturday.

Have a great Thanksgiving.

Read More

[Chart courtesy of MarketWatch.com]

1. Moving the markets

More positive vaccine news coupled with newfound hope for a strong economic recovery next year and some easing of political uncertainty, although the election has not been decided yet, combined forces to propel the markets higher. A well-timed short-squeeze lent an assist again.

This weighed heavily:

Traders also cheered on Tuesday the increasing political clarity after General Services Administration chief Emily Murphy told President-elect Joe Biden that the Trump administration is making federal resources available for his transition into office.

Low volume, due to most traders being out for this Holiday week, made it easy for the bulls to shove the indexes higher, despite tumbling Consumer Confidence, rocketing Covid cases and humiliating business lockdowns. We will find out next week whether this levitation, which has now been called a blow-off top, really has legs when Wall Street is fully staffed again.

“We have seen a post-election plunge in fear and surge in greed,” as Nomura’s McElligott called it. The Volatility Index (VIX) has collapsed with incredible speed, as a result of “US conditions having hit all-time easiest levels.”  That has promoted reckless buying with both hands and feet, however, the strange anomaly is that insiders have been selling. Who will be right in the end? No one knows, but when this bubble unwinds, it will be painful.

Be that as it may, during these post election “risk-on” times, gold has been slammed as has been the tech sector, however, the latter has been holding up better than the former. I will take the upcoming long weekend as an opportunity to re-evaluate our current holdings and adjust next week when everyone is back at their computers ready to push the buy and sell buttons.

Read More

[Chart courtesy of MarketWatch.com]

1. Moving the markets

The futures markets pointed to higher equity prices, as AstraZeneca became the latest competitor in the Covid-19 vaccine creation fest saying its product would be 90% effective.

News over the weekend that the first vaccine could be available within weeks after the anticipated FDA approval in mid-December helped the market continue its northerly path during the regular session.

A mid-day sell-off was the result of suggestions from the Biden administration that there would be no compromise on stimulus, which caused the US Dollar to spike and gold getting hammered. I expect this condition to be ephemeral in nature and look for a reversal by sometime next week.

The main beneficiary of today’s vaccine news was Small Caps, which soared to a record high, as the result of a gigantic short-squeeze and a bulletin that Biden’s primary pick for Treasury Secretary would be stimulus-hungry Janet Yellen.   

In the end, the Dow lead the major indexes, with the Nasdaq lagging, as Apple got clobbered and lost some 3%, in the process breaking below its 50-day M/A.

ZH noted that hard (real economy) and soft (survey) data have massively decoupled on nothing but a sea of hope:

Sooner or later, I expect a recoupling to occur.

Could it be the forced selling of up to $310 billion by year-end due to the upcoming pension rebalancing of their 60/40 equity/bonds split, as JP Morgan claims?

We will have to wait to find out…

Read More