One Last Thin Mint?

Good Morning:

— I have always been a Monty Python fan. And I recall the scene where the fat guy gorges a table full of food, asks for one more thin mint, then blows up. 

— And that reminds me as to where the S&P 500 Index finds itself at the moment. It has had a great run from the correction low.

— The Magnificent 7 Generals led the charge, and the Soldiers now need to follow. And we have seen some positive rotation lately.

— Otherwise, the bulls will have to pass the football, and that could get unpleasant with the weak structure (open gaps and VPOCs) all the way down to the October lows.

— In that vein, we reduced our equity exposure in both the Daily and Hourly Strategies from 50% to 25% at 4655.50 on the March 2024 Futures Contract this morning.

— Recall that we had previously reduced our exposure from 100% to 50% at 4645 at the end of November.

— The price action here looks eerily like the price action around the July peak.

— Prices need a rest, and while the consolidation in early December is helpful, it may not be enough to entice further buying without a meaningful pullback.

— Far be it from me to tell the market what to do, and the possibility of one more thrust higher to the 4734.50 summer peak remains on the table. But a pullback of at least 25% of the rally may be required to refuel the tank.

— We have monthly options expiration and the December Fed meeting next week. I don’t think there will be any surprises, and the market has already incorporated good news.

— So I am looking at this fabulous run as a “buy the rumor – sell the news” rally. The news is the Fed decision next week – likely to be the usual vague reference to incoming future data.

— Incidentally, these are some of the longest swing signals we have held lately. But all good things must come to an end.

Have a great weekend and stay tuned.

A.F. Thornton