Key Tactical Takeaways:
> Although the S&P 500 has delivered the muted returns we anticipated in the wake of the 11/09 overshoot(see page 8), speculation regarding vaccine distribution and stimulus, as well as the appointment of an uber dovish Treasury Secretary, are fostering a correction in time, not price.
> Several days of reflexive stability in the all-important growth vs. value ratio may be giving way to the anticipated next wave of value leadership (see page 9).
> While sellers defended the critically important ... level on the 10-Yr yield during Monday's session, the short-term trend will not turn back in favor of higher yields until we see a close > ...
> Gold investors have failed to defend the critical ... support area. As a result, risk now extends to between ... and ..., where the next major bottom should start to form.
Some Quick Thoughts:
"It is what it is" was a favorite saying of my first boss in the financial industry. As simple as it is, this saying pretty much encompasses the world we live in when it comes to an entire generation of investors who are basically being trained not to take losses. I'm sorry, but I have never been a fan of the "Everyone Gets a Trophy" approach. When it comes to markets, failure, struggle and accountability are simply too important to be removed from the process of developing responsible risk taking, but I digress. The appointment of Janet Yellen as President-elect Biden's choice as Treasury Secretary is just what this market needs to fuel near historic levels of margin debt and squash any hope that free market forces might one day return for at least another 4 years.
As the train of Monday morning vaccine headlines keeps rolling in, we remind you that the market has actually faded these press releases over the prior two weeks. Although we are seeing a follow-through bid this morning, it is worth noting that this is actually the first time the S&P 500 is technically in a short-term downtrend against a stop of ..., as a result of the sideways-to-lower range that has taken shape since the massive 11/09 vaccine-fueled gap higher.
Bottom Line: After staging its massive 13%ish extension above the all-important 200-DMA earlier this month, the S&P 500 has delivered the muted returns we’ve been looking for (see page 8). We actually find it quite interesting and potentially short-term bearish that the market is not reacting more bullishly to Monday's Yellen announcement. Not all is lost, though, as the action really hasn't been in the major indices for the past several days. Specifically, those retail traders that are not stuck holding the bag on now struggling growth stocks have turned their attention to small caps. Be sure to check the Trade Ideas Sheet on page 3 for updates on our recent breakout picks. page 3 for updates on our recent breakout picks.
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