I read recently that over 80% of all the S&P500's assets are now intangible. It's remarkable the impact that sentiment can have on valuations. I don't think anyone can imagine a scenario where stocks crash 84%. But, if history has taught us anything, it's that sentiment, alone, can accomplish this seemingly impossible feat. The perpetual sense of "hope," delivered to market participants through optimistic narratives, on a daily basis, is certainly helping the cause. In a recent report, Jared Woodard, at Bank of America, mentioned that value investing is dead. At the moment, I have to agree with him. But, only as long rates stay low, and sentiment stays high. Based on my own personal experience, it appears that sentiment injections are slowly losing their potency, and effectiveness. The law of diminishing returns is beginning to rear it's ugly head, and when sentiment eventually shifts to the downside, we all know what happens next.
Jobless claims came in better than expected at 712k vs. expectations of 775k, with continuing claims at just over 5.5MM. Pandemic emergency claims continue to rise, and hit an all-time high last week with a print of 4.57MM. The total number of Americans still on some form of unemployment is hovering around 20 million. You won't see that on the news, though. ISM Non-Manufacturing index came in worse than expected at 55.9%, the lowest print since May.
LA has just imposed new lock downs, and I'm getting a sense that California may try to take this state-wide at any moment. Most of Europe is on strict curfews and lock downs, but don't tell that to their stock markets, which are barely changed since the news broke. France is a perfect example; the CAC40 was up the day France imposed new lock downs. Simply astonishing.
The majors were up marginally on the open, after a stalemate in overnight trading. But, the SPY is currently making another all-time high, as we speak, and is sitting around 368 an hour into the morning session. Hourly RSI is sitting just below 70, showing overbought conditions, and the daily RSI is approaching overbought levels, also, with a 66 handle this morning. Clearly the jobless claims print won't be a catalyst for weakness in risk assets today, but November payrolls are out tomorrow and I'm keen on seeing how the "recovery" progressed in November.
Stay tuned for live updates throughout the day, and thanks for your time today guys! If you enjoyed today's analysis, please hit the Like button and subscribe to our profile. The information and analysis shared in this post is not financial advice. Always conduct your own analysis and research. Cheers, Michael.
Comment
⋅
Now seeing headlines that McConnell is open to negotiating with Pelosi and Schumer on the $900 Billion stimulus proposal by "moderate" lawmakers. I don't know what happened to Democrats never budging on the $2.2 Trillion number, but I digress. Perhaps the big news of (relatively small) stimulus will finally yield a sell-the-news event for the bears. Let's see how markets respond as we approach the afternoon session...
Comment
⋅
SPY losing some steam here along with the Nasdaq, but the DOW is holding up fairly well. We're seeing some news of an apparent OPEC deal being reached, which would add 500k bpd to the current production cut of 7.7MM bpd. WTI is not responding much to the news as yet, but definitely some weakness across the majors...
Comment
⋅
Comment
⋅
SPY is approaching the ascending trendline again in weak fashion. Let's see if the bears are planning to recapture at least 1 key resistance level before Friday...
Comment
⋅
Comment
⋅
Vix is fast asleep, but looks poised to spike higher with the sound of a pin drop...
Comment
⋅
Comment
⋅
SPY approaching the all-time high's once again. The bulls want more, and why not, there's essentially no resistance overhead, and no gravity near by, other than the supposed "gamma wall," which according to Spot Gamma, is sitting around 365. I've yet to see any of the excess CTA flows to notaby affect price action. The November month end selling was non-existant also. There's not a bear in sight. Let's see what November payrolls have to say about all this complacency.
Comment
⋅
Comment
⋅
The Put-to-Call ratio is marginally off the week's low's, but still looks extremely skewed...
Comment
⋅
Comment
⋅
Just saw an article on Zerohedge that stock valuations have surpassed those in 1929. I constantly read articles showing the historical divergence between current valuations and the real economy (GDP). Mean thile, the FED is busy trying to replace the labour market with a printer...
Comment
⋅
Bears showing up here at the 99th hour with a small probe down to the 21 period EMA on the hourly (366.22)...
Comment
⋅
Comment
⋅
That's all fols! Here's a good look below at the battle into the close. The bulls showed up with a massive buy program in the final minutes, but couldn't quite recapture the ascending trendline. November payrolls and weekly wrap up tomorrow. I look forward to seeing you guys at the show. Have a great night! Cheers, Michael.
The market is completely emotional based. This isn’t anything new, and with news of vaccines being approved around the world, you’re going to see these stocks rise. This stock market won’t drop until all lockdowns and restrictions are lifted mid to late 2021 when investors stop trading on emotions and start trading on fundamentals again. The drop will be epic.
Hedge_Of_The_World
⋅
@NICKMEDINA5280, Well said, we could definitely be in for a massive drop soon. I think the vaccine/stimulus news will be confirmed soon, but it will be a sell the news event, not a catalyst for further euphoria. Many of the FED's lending progams stop EOY, so I'm paying close attention to how bond funds and treasuries are responding as their favorite (perpetual) buyer leaves the building, so to speak. The 10Y yield is up over 80% since August, and it looks like we may breach 1% imminently. Crypto and Gold may be the only places to hide when this house of cards comes crashing down. I appreciate your insights today man, thanks for sharing.
Dr_Roboto
⋅
Wow, great analysis today. Love it. Keep it coming.
Still trying hard to break that 1.236 fib level.
Hedge_Of_The_World
⋅
@Dr_Roboto, Thanks buddy! I appreciate that. It's always great to see you, and your work is awesome. Definitely getting some strong resistance here at the 1.236 fib. Any expectations for tomorrow's price action if we see a weak payrolls print in November? If we see a notable miss, I'm thinking we close the week with a 355 handle. Maybe that's wishful thinking, but the labour market recovery is grossly distorted imo.
dustinmerryman
⋅
@Hedge_Of_The_World, I know that at least here in Washington State, thousands of people were being laid off each week in November as our Governor started to tighten restrictions. I don't know if these numbers will be captured in tomorrows report or next month when they release Decembers numbers. I'm assuming the trend here in Washington and well the west coast if happening all across the country. Do you know how long it takes for layoff's to register? As always, thanks again for your time and analysis. Greatly appreciated.
Hedge_Of_The_World
⋅
@dustinmerryman, Thanks buddy! I appreciate the insights as always. I'm hearing from traders everywhere that layoffs are increasing, and lock downs are stifling shopping/dining as we approach winter. Not just in the US but globally. Continuing claims lag the weekly jobless claims print by 1 week, which show the numbers for the previous week (ending November 28th). The payrolls print tomorrow will be for the month of November, so it's very up-to-date. If memory serves, it was an ugly payrolls print of around 66K (for November also) which helped fuel the crash in December 2008. I hope this helps!
dustinmerryman
⋅
@Hedge_Of_The_World, Yes, thank you! That helps a lot. I'm expecting a very dismal payroll print tomorrow. I think will get an indication of what the market thinks in the last half hour of trading today and throughout afterhours/pre-market. Cheers!
Hedge_Of_The_World
⋅
@dustinmerryman, I agree, I think power hour now takes place in the final minutes of trade. Long-term investing is now holding your position for a week. Lol.
Tiger_Style
⋅
I trust this narrative, nice work! Fortunately, there is still time to trim equity positions unless your head is too firmly buried in the sand.
Hedge_Of_The_World
⋅
@Tiger_Style, That's very kind of you to say, my friend. Thank you! I agree, if there was ever a time to take profits, or grab a hedge against risk, it's now.