The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Amazon saves the day.
Amazon jumped 10% in after-hours trading after releasing their results. Equity futures jumped higher as well. The bullishness persisted overnight and through our morning. The S&P opened about +75 points and slowly fell over the morning. The index went briefly negative around 1 PM when the dip-buyers pushed the index northward again. Headlines were generally immaterial to broader markets and the positive mood in US equities is mostly thanks to one stock, AMZN. The Treasury curve changed very little and the probability for a 25-bip Fed cut in December is now 64%. Capital flow was high at 119%.
Amazon’s results not only beat the Street but also reassured the megacap/Mag 7 longs that the AI trade still has legs. While the other Mag 7 names had mixed stock performance today, AMZN’s gains were large enough to dominate the rest. AMZN contributed +24 points to today’s S&P change. AMZN also inspired bullishness elsewhere in the market as today’s rally had some broadness. If yesterday gave Mag 7-believers pause, today renewed their faith. Sentimentally speaking, it’s onward and upward.
The month was good for the longs. The S&P climbed 2.3% in October and the nasty fears of October’s poor seasonality can be put to bed this time around. November has been the best seasonal month for stocks by the way so there’s no doubt that bulls of all stripes, especially the technical ones, are gearing up for more upside.
Supposedly 80% of managers are trailing their benchmark. October didn’t let those managers back in. There’s going to be a chase for the rest of the year and today might already be part of that game. Certainly a devastating headline or event will spoil the party but as long as things remain fairly steady, the investing landscape is tilted in favor of the longs.
I continue to wonder when the government shutdown will bother the markets. I assumed that a second missing nonfarm payrolls would cause problems but that doesn’t appear to be the case. We’ll see.
I would also note that *if* the continuing shutdown does trigger risk-off reactions in the market, all the dip-buyers are going to do a dance and buy with both hands. If the market sinks significantly, it will force Washington’s hand, and the reopening will come that much quicker. It will then ignite such a rally, maybe even those underperforming managers will catch up to their benchmarks.
My point is this, the only visible risk is the continuing shutdown. If that stokes market fear, it’ll be the easiest buying opportunity of the last few years.
Buy early
Buy often
Flip your position when the new all-time highs print
See you Monday, have a great weekend. Happy Halloween.
-Mike
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