Goldilocks Is Alive and Well and Wildly Overbought
Intraday volatility gave way to another strong day.
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A massive downside revision to job numbers caused some intraday volatility on Wednesday, but the minutes of the last Fed meeting raised confidence about interest rate cuts, so the news about jobs didn’t matter much. It was already known that the job numbers were very unreliable, but the important thing is that inflation is under control, and there are no signs of an economic collapse. Goldilocks is alive and well, and that was enough to produce another positive day of market action.
Breadth was quite strong, with over 7000 gainers to 2100 losers. The most notable statistic was nearly 900 stocks hitting new 12-month highs. This was mainly driven by the Russell 2000 (IWM), which gained around 1.3%.
The Magnificent Seven names lagged with the Nasdaq 100 (QQQ) up around 0.5%, but there was some solid rotational action to make up for weakness in Apple (AAPL), Microsoft (MSFT), and other big-cap technology names.
While it was another positive day for stocks, the technical issues are becoming even more problematic. Many stocks are now wildly overbought, but they are not relenting due to FOMO and short squeezes.
Expectations for the Jerome Powell speech on Friday morning are sky-high, and the danger of a ‘sell the news’ reaction keeps building. The market is expecting a very dovish Fed as well as a very healthy economy. Those two things don’t tend to occur together, so at some point, there will be a day of reckoning.
For now, the trend is your friend until it ends, and there are few signs of ending, although the charts are becoming downright ludicrous.
Have a good evening. I’ll see you on Thursday.
