Monday Takeaways: Ride the Tiger
The stock market has some big momentum heading into the end of the year.
We’ve seen four straight weeks of market gains… and the Nasdaq alone is up 10% in November.
Will it be smooth sailing from here?
Here’s what I’ve got my eye on… and what you should be watching this week…
From the “Magnificent Seven’s” new highs to what the VIX is telling us.
We’ve got a “ride the tiger” rally. It’s fast and strong… but also wild…
Especially considering we’re seeing slowing growth in many U.S. states.
That’s why I’m watching one number to determine whether we’ll get a true breakout.
It’s all in my Monday Takeaways video.
Good day, all. Shah Gilani here with your Monday Takeaways.
First off, a look back.
Another good week for stocks. Four weeks in a row, positive gains for the stock market.
The takeaway there is this market has momentum, people. I think we can see a year-end Santa Claus rally. We’ve already seen the beginning of it.
There’s nothing really stopping it. There are a few impediments which I’ll get to, but the takeaway from what’s happened the last four weeks is there is a lot of momentum going forward.
What else was important about last week was we had a lot of stocks breaking out, and the reason that things were positive was because we had the big names, the usual suspects, breaking out.
Nvidia, people. Not only a 52-week high, an all-time high. Microsoft, 52-week high. Oh! An all-time high. Not only that, we saw 52-week highs for Meta. We saw 52-week highs. Apple got close. Google got close. Tesla not so much, but there you go.
Magnificent Seven, people. Still moving the market. X, Tesla… which looks like it’s got a whole lot of nothing behind it right now… and I’ve been knocking Tesla. So for all you Tesla fans out there, sorry, but I still don’t see any late-game hope for Tesla here.
But the takeaway from that is to ride the market, people, because of the Magnificent Seven. What got us here? We’re up 10 points, almost 11% in the Nasdaq for November.
So it’s the big movers and shakers that have taken us higher, and I think we just continue to ride them. So your takeaway there is you go with the flow, people. That doesn’t mean it’s gonna be an easy ride, but that’s what’s happening.
Next up, the VIX. Friday… I’m gonna give you the exact number on the VIX because it was a post-pandemic low – 12.47. Wow! Twelve is one standard deviation from the VIX’s almost 20-year average of 20.
So that’s one standard deviation. Eight points is one standard deviation. It doesn’t get down there that often. And once it gets down to the 12 range, it doesn’t go a whole lot lower very often.
So the takeaway there is, as long as things remain quiet vis-a-vis the VIX, then more money will come off the sidelines.
The risk parity funds that see volatility coming down in equities are gonna put more money into equities. And then we can see, I think again, the Santa Claus rally going into year-end is already started, and there’s no reason for it not to continue.
So the takeaway there is ride the tiger, which doesn’t mean that it’s not a wild animal because it is.
So what else are we looking at? Markets that are overbought.
So as far as riding the tiger goes, just be aware of the fact that markets are very overbought in here, including the Magnificent Seven – again, X, Tesla, etc. – but everybody else is getting up in overbought territory, people. So is there gonna be some profit taking? Entirely possible.
But with the S&P about 4,559 closed on Friday, 4,600 is right there.
And guess what? 4,607 is an intraday high from July. We get there, we break out. There’s nothing above us.
It’s clear sailing. So the market’s gonna maybe try and slow down a little bit. There might be some profit taking, but I’m still going with year-end rally, people.
I’m just giving you what to be aware of.
We are overbought here, and there could be some profit taking.
Another thing that is a little worrisome in here… because, again, you’re riding a tiger here… is that the economy, as good as it looks, isn’t really as good as you think it is.
The Philadelphia Fed came out this weekend with statistics for what’s going on in the various states, all 50 states.
And here’s what’s interesting.
Over the last three months… and this is pretty compelling… Over the last three months… and I gotta find all my notes ’cause I got a ton of notes on what the Philadelphia Fed said… “We’re looking at a slowing of growth in a lot of states.” So over the last three months, we went from 33 states showing positive growth to only 16.
Over the same last three months, we saw 16 states in contraction go to 27 states in contraction, all right? So not slowing growth but negative growth, all right? That’s a bit worrisome. Again, we went from 33 states with positive growth to only 16 with positive growth, and that growth is slipping.
And we went from 16 states showing contraction in their economic growth to 27 states now in contraction.
So is the economy slow? Does it look like the market? Yeah!
It kind of looks like the market, doesn’t it? I mean, if you look at 7 out of 10 states are moving really well. Seven out of the 10 most important states as far as economic growth, are, and they’re growing still. California, Texas, Florida, Illinois, Pennsylvania, Georgia and North Carolina. That’s 7 out of the big 10 that we need to see growth.
Remind you of something?
Yeah, it reminds me of the lack of breadth that we’ve been seeing in the market. We’re seeing a lack of breadth in terms of economic growth across the 50 states. Does that portend a recession?
I think it does. I think we’re seeing the wrong kind of momentum as far as economic growth. And I think what we’re seeing here is the same thing we’re seeing in the stock market. Let’s see how long it can last.
I think we can see economic growth grow into or at least hold on through the end of this fourth quarter. Why? Because we’ve already seen record numbers for, guess what? You know what I’m talking about.
Black Friday. Mastercard said sales were up more than 8%. Year over year, we’re looking at about 7% Black Friday sales up. Cyber Black Friday sales were up 13% year over year.
So consumers are still out there spending. Are they spending their last bucks? Maybe. I’m kind of leaning into that gap.
So we got some things to look out for, but I think we have a bit of a clearing, maybe a broad clearing through year-end. But then we’re gonna have to take another look at what we’re looking at come January, February, March. Things may slow down.
But right now? Ride the tiger, people.
That’s your takeaway for this week. Enjoy it, but be careful out there.
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