The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Everybody back in the pool
S&P 500 futures traded up at 4 AM and they never looked back and the bears never had a chance. News wasn’t material today so there’s no story behind today’s upside. The index opened about +20 and was +60 within 5 minutes. The index consistently climbed further over the day and was +100 by lunch. The index looked squeezed towards the close, for what it’s worth. Treasury yields climbed. Bitcoin rallied over 10%. The tech sector led all others, by far. Whatever went down yesterday seems to have rallied today.
The dip-buyers get to declare victory yet again. Apparently, the last week and a half of skepticism and worry was just a bad dream. Today’s rally was a scramble. Fear of missing out was on display. The S&P is only 70 points away from new all-time highs. Happy days are here again.
At least until we see how things trade on Monday.
One could argue that the worry and the selloff came out of nowhere so they *should* disappear randomly and without cause too. Maybe that just happened? Of course, one could also argue that the market sniffed out some smoke and was rightly worried about fire. We don’t see it today, so we partied, but it may be obvious in short order.
It feels like we just went through a large risk-off, risk-on cycle. Most everything went down and then up together. The capital flows this week were consistently large. Lots of capital sloshed away from risk and then back towards it. We don’t have good answers as to why either.
Perhaps some leverage was just forced out of the system? If that’s all it is, the bull will keep running. For assets that almost recovered all their losses this week, it’s probably a good sign that *those* assets are in a good place. For assets that simply bounced hard today, but are still far below their prior highs, like Bitcoin, today’s rally is not a sign that those assets are in a good place.
I wouldn’t assume that today is the bottom in those battered assets. If I were looking to put capital into risk, I’d prefer the assets that weren’t very far off their recent highs.
Have a great weekend, see you Monday.
-Mike
Visdom Market Commentary
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