HAPPY THANKSGIVING

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HAPPY THANKSGIVING. THINK ABOUT DOING SOMETHING FOR SOMEONE YOU NEED ABSOLUTELY NOTHING FROM!
To be repetitive:
Powell leaked his change of stance on Christmas eve from “raising rates” in 2019 to “patience!”. Markets bottomed immediately. Powell confirmed the leak a few days later. Markets rallied into the end of April before a whopping 6-10% correction into the end of May. Powell again leaked another change of stance from “patience” to “lowering of rates!” Markets immediately bottomed  again. Powell confirmed the leak a few days later. Powell then lowered rates…and lowered rates…and lowered rates. But markets just moved back and forth. What to do? Even with the rate cuts, markets were not cooperating. Markets fell into the beginning of October. What to do?
Word leaked out around October 3rd that there was consideration for some sort of QE.  What? QE with 3.6% unemployment and with markets up 15-20% on the year? Markets bottomed that day. AND  on October 8th, not with an announcement but in an interview at some sort of economic’s club, Powell confirmed QE BUT DON’T CALL IT QE. It wasn’t any ordinary QE but as of this writing, Powell is on a run rate of over $1.5 trillion of printed money for the next year. This is more than Bernanke’s ($1 trillion) QE at its most. Just keep in mind, Bernanke printed money when unemployment was in the high single digits and when we still did not know if our financial system was stable. What is Powell’s excuse doing this at 3.6% unemployment and with markets near highs? It’s called NOTHING IS BAD AS LONG AS MARKETS GO UP. It just took Powell time to figure it out.
The day we heard about this latest QE, we told you to expect another leg up in the market. This was based on the fact the markets have loved QE and easier money since the 09 lows. This was based on the fact we were heading into a seasonal strength period. This was based on the fact that there was a ton of cash on the sidelines. Markets did indeed bottom again…TO THE DAY. The breakout of the big 4 indices combined with seasonality and cash on the sidelines continues to solidify the move. Notice the persistence. Notice we cannot even get a 1% pullback. “QE BUT DON’T CALL IT QE” to the tune of over $100 billion/month (not a typo) does work. Keep in mind, just about everywhere around the globe, central banks are easing, have negative rates or are also printing. Germany is in recession but the German Dax is at new yearly highs.
None of this is to throw cold water on price. We are just letting you know markets are up significantly this year with pretty much no earnings gains. Since markets are about earnings and interest rates, guess what is doing the trick? Jay Powell just effectively lowered rates 10 times with his “QE BUT DON’T CALL IT QE!” Notwithstanding pullbacks, which can occur at any moment, we expect higher prices into the end of the year. Even the lagging RUSSELL 2000 (small caps) has finally moved above its intermediate term resistance. Poor earnings continue to be bought while strong earnings get gapped to the upside. As always, if we start to see any changes, we will let you know…but so far, the ridiculous easier money wins out again.

MARKET NOTES

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First off…it is Thanksgiving week. THINK ABOUT DOING SOMETHING FOR SOMEONE YOU NEED ABSOLUTELY NOTHING FROM!

Pullback? That’s no pullback. The big 4 had a minor pullback. No biggie! For sure, there are a few things to watch but as a while, the big 4 have hardly budged even though sentiment is extremely bullish and a few areas may be having some problems. There are just about as many NEW YEARLY LOWS as HIGHS…which is quite amazing.

RUSSELL 2000still cannot get above intermediate term resistance but close. TRANSPORTS not as strong.

KLAC, AMAT, LRCX…to be watched. SEMIS always important. Names like MU, XLNX gross but names like AMD strong so becoming more of a mixed bag.

BIG FINANCIALS fine with XLF poised to move out of a shorter base.

Watch STEEL (SLX) Yes…we said STEEL. Could be emerging.

GOLD/GOLD STOCKS while not bearish, continue to love below 50 day. So far, just a correction off the last move but no biggie so far.

POWELL still on a run rate of $1.5 trillion of QE which is a lot more than Bernanke did when we had 9% unemployment and worries about the financial system were front and center. Look no further as to why we just had another bump up. The market bottomed the day the news was leaked and ramped the day he announced it while being interviewed at an economics club…BUT DON’T CALL IT QE!

 

 

 

EARLY NOTES

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Since October 3 when it was leaked the potential for some QE and then the October 8 confirmation, you know what markets have done. Powell figured it out. Easier money on any and every correction. Amazingly, it still works after over 10 years. Yup…word leaked out around October 3rd that there was consideration for some sort of QE. Markets bottomed that day. Not kidding…and on October 8th, not with an announcement but at an interview at some sort of economic’s club, Powell confirmed QE BUT DON’T CALL IT QE. It wasn’t any ordinary QE but as of this writing, Powell is on a run rate of over $1.5 trillion of printed money for the next year. This is more than Bernanke’s ($1 trillion) QE at its most. Just keep in mind, Bernanke printed money when unemployment was in the high single digits and when we still did not know if our financial system was stable. What is Powell’s excuse doing this at 3.6% unemployment and with markets near highs? It’s called NOTHING IS BAD AS LONG AS MARKETS GO UP. It just took Powell time to figure it out.

 

As long as the major indices do not tuck their head in like a frightened turtle and fail this move out above range, all is well. The good news is that growth is acting better. The good news is that the all-important SEMIS and FINANCIALS continue to lead. For sure, it is not a dart throwing market as by our count, only about 60% of the market is working but whatever is working is nothing to sneeze at. For sure, sentiment is off the charts too bullish here but so far, we cannot even get a 1% pullback. Markets love QE…BUT DON’T CALL IT QE.