September 30, 2024
Good morning,
The S&P 500 Index has been setting marginally higher new highs the past two weeks, spurred on by the Fed’s rate cut and China’s massive stimulus programs. That distills down to a strong Tape (“Don’t Fight The Tape”) and an accommodative Fed (“Don’t Fight The Fed) – the first 2 of the 3 cardinal technical rules of investing. The third, “Beware Of Sentiment At Extremes,” is not yet in force. U.S. bullish sentiment is rising but is not yet at an extreme level (the same cannot be said for China). With the exception (even expectation) of a correction along the way, a good Tape with an easing Fed should provide a runway higher for U.S. equities into year end. To accomplish that, the market will likely have to ignore some noise; seasonality, earnings season, and the election = its wall of worry to climb.
China is up over 8% overnight. That is a gain of over 25% in 5-trading days. Some overnight gains no doubt represented a front-loading of stock-buying demand ahead of the Golden Week holiday that shuts onshore markets until Oct. 8. Extraordinary moves in one direction are commonly followed by reversals, especially when markets are frozen due to a holiday. If nothing else, it should be a dramatic scene in the coming days in Hong Kong and next week in China.
Back home, we have jobs week with ancillary employment metrics trickling out all week until Friday when the September employment numbers are released. Markets may be relatively quiet until the end of the week.
Be well,
Mike
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