It is exactly three weeks since the rather tardy Santa rally commenced. After tagging SPX 1205, the Mystical Holiday Forces jumped the morning futures up 35 points and the end of the year rally was quickly born. Today feels fitting as it is just about run its course after gaining a full 75 SPX points, 600 Dow points and 150 Nasdaq points.
Most of the attention has been focused on yesterday’s heroes; mega-cap cash flow consumer and technology companies. Plus Apple, which has added 12% or approximately $40 billion in market value during this time and is now testing its yearly highs.
There is more shitty news out of Europe, but nobody cares any more because they have plenty of cash to avoid any crisis, thanks to the stealth QE through Swap Lines. If you don’t think we bailed them out, please simply notice that there is no more market scares regardless of news or headlines. Case closed, for now
The one fascinating feature of the equity market this year has been the “holiday volume”. One of my predictions is that average daily volume on the NYSE will be 600-700m shares per day, half of what it was last year. There remains very little true liquidity and so both individual stock and index velocity will remain high.
With the individual investor out of the markets other than for “safe” bonds and their yearly 401k contributions, markets will swing on a dime. With Europe “safe” for now and the election this year, most “investors” fully expect some type of monster stimulus to be coming shortly. And most of the current environment’s sellers have already sold and are focused on January Effect bounces in momentum stocks and of course Apple. Little matters past that as most continue to be lulled by the resilience of the indices. Time to start paying attention!
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Scott,
always a nice read. I just dont see the stimulus though, unless it is stealth like LTRO and the SWAP lines.
My best guess is that nay gains will be put in before June, when sell in May kicks in. Flat summer, and then regardless of who wins (0Bama) – shovel to the head and a massive QE.
They will just white wash all the problems for now, show some good/improving economic data so POTUS can stand up and say “it aint great, but we’re headed in the right direction, and now is not the time to change things”.
So likely an even keel over all with a couple of pull backs, but I will be surprised if we see any significant washout, even though we should. Thats later when 0bama is in his 2nd term.