I am out this week, as previously announced. Nevertheless, let me share a few thoughts.
Tech, particularly Nvidia and Tesla, have been carrying the water the past few sessions. So, the action has been narrow for a few days. The pre-holiday bias generally is positive. But a move to the bottom of the short-term range around 4640 or so is not out of the cards on the S&P 500 index futures. The uncertainty is best approached as a day trader for now.
There is a possible move up to 5000 on the S&P 500 as we approach year-end (for a brave swing trader). I would consider betting on that move from 4640, but I am not brave enough to take it here. Just note it in your narrative.
Overall, I see no big movement into risk-off assets except that risk-on assets are bordering on blow-off, parabolic behavior. We are likely on the verge of another rotation back into the XLF, XLE, IWM, and DBC. All of these have pulled back nicely, so I am watching for a pivot around their original breakout areas. We are not there yet, but these sectors and their leading names could be on your screens.
As has happened several times in the past year, the push/pull rotation between Nasdaq tech (e.g., QQQ) and the Dow type names (e.g., DIA) has left our core, S&P 500 index, somewhere in the middle with a slight upward slope. Also, at times, the rotation puts the S&P 500 into a trading range. So those are the possibilities for now.
If the current administration replaces Chairman Jerome Powell at the Fed with Fed Governor Brainard, it will cement the woke virus and leftist control creeping into the Federal Reserve, and many will find that frightening. I am not sure how the market will interpret this.
Clearly, a change at the helm does not help the case for lower inflation. On the other hand, the money spigots may keep on flowing until the whole monetary system blows – and there is a lot of money to be made as long as you are not the last one to turn the lights out. It will be interesting to see the market’s reaction to any change. No change at the Fed is status quo, and the market should continue its current path.
I ask myself as we close out another year from virus hell, what if the Left is right? What if you can spend as much money as you want because you hold the keys to the World Reserve Currency? They call it Modern Monetary Theory or MMT for short. It used to be just a theory. Now we will find out if it really works.
It is kind of a heads they win, tails we lose theory if you think about it. If they are right, they win and consolidate permanent power. If they are wrong, the system collapses, and they get to build it back better. Can you say, “Comrade?”
On that happy thought, let me convey my best wishes to you for a happy holiday week. Forget about the market. I will update you a week from today.
A.F. Thornton