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As the Thanksgiving holidays approach, there is something to be thankful for, especially being able to reunite with friends and family in the age of post-COVID isolation. I think there will be more people traveling by car, plane and train than ever before.
The food will be delicious and we will share our thanks for a lot of things including being alive, being together, the good (and expensive) food and the fantastic stock returns of the past two years since January 2020. In fact, since 12- From 31-2019 to last Friday, the rate increased by 45.7% with a roller coaster descent of over 35% during that time.
If you had used Alpha Rotation your drawdown would have been minimal, and our conservative Alpha S&P 500 was up 40.6%, while our moderate alpha rotation S&P 500 would be up 119% and again you would have seen a surge (long bonds / TLT) during the March 2020 sale.
So what is it that smells?
As we sit here today, enjoying the second most number of new day ATH highs on the S&P 500 since 1995, we are also experiencing heightened uncertainty in the market. Most notably, market insiders and market sentiment have eroded despite two US stock indexes hitting new ATHs this week. Additionally, Grandpa Russell () was down nearly -3% for the week while it was up over 2%, a very mixed message. The big question is whether or not IWM can maintain its highest 6-month calendar level, which is currently $ 232.
Mish nailed yet another inconsistency in her:
“Last week the market found both love and irreconcilable differences. The love came from large cap tech stocks. NVIDIA (NASDAQ :), Apple (NASDAQ :), Google (NASDAQ :), Microsoft (NASDAQ 🙂 all gave investors hearts and flowers. On the flip side, industrial metals and transportation stocks gave investors indigestion, which is embarrassing ahead of Thanksgiving. “
With an increase at an accelerated rate and disruptions in the supply chain creating shortages and increased demand, everything including milk, cars, food, paint, and especially Turkey, is increasing at rates double digits, which will eventually wreak havoc on our society. These rising costs will (if not already) impose a substantial tax on every American just through their daily purchases.
Risk activated / bullish
- Discretionary Spending () and Semiconductors () each increased by 3.7% over the week, 2 highly speculative sectors
- Growth stocks (), led by a few mega FANG stocks, were up on the week, while value () fell
- The US dollar () was up 1% for the week, putting pressure on precious metals
Risk disabled / Bearish
- Market insiders have collapsed this week, particularly the McClellan oscillator for the SPY and the NASDQ composite.
- 9 of 14 sectors / industry groups we track ended the week, despite the S&P 500 and NASDAQ 100 hitting new all-time highs
- Hindenburg indicator shows 14 ominous omens, a flashing red light for the S&P 500 ()
- New highs vs. new lows that look bad for SPY
- Volume analysis showed distribution, particularly in IWM with only 1 day of accumulation over the past 2 weeks despite its recent run to new all-time highs
- Sentiment measured by appears to be on the verge of a major breakout, with the 50-day moving average (DMA) looking poised to break the 200-DMA for the first time since August 2020
Neutral
- Major divergences in price action between the 4 key indices, with () making new highs up + 2.3%, while IWM fell -2.83% on the week is neutral at best for US equities
- Risk indicators remained in the neutral zone for the SPY
- Energy () and Oil Services () both fell significantly on the week as U.S. gas prices continue to rise
- Overall, foreign stocks have lost ground against US markets, which is not surprising given COVID-19 lockdowns across Europe
- Precious metals have returned on average after being overbought, they will likely consolidate, preparing for the next upward move
- Inflation is rising with soft commodities () flying this week, potentially positive in the short term but bearish longer term for equities
Crypto highlights
- fell nearly 15% to start the week, but now appears to be making an effort to regain support above the 50-day moving average
- also suffered to start the week as the coin’s price fell below $ 4,000 for the first time since October
- The biggest catalyst for this week’s crypto market decline was the options expiration Friday, which saw BTC temporarily drop the $ 60,000 level and ETH drop $ 4,000. From Saturday evening, the market already seems to rebound quickly
- was the best performing large cap coin this week, up + 35% as the rest of the market collapsed… a bullish sign for the decentralized financial space
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