Next Week Wall Street Returns to Reality
There is still a high level of optimism about the economy, but dangers in this market remains.
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It was classic Friday-after-Thanksgiving trading action. Volume was light, but the action was very positive, with breadth running about 7,000 gainers to just 2,400 decliners. There were over 800 new 12-month highs, but the most notable action was a long list of smaller stocks moving up more than 10%.
Bitcoin-related names did well, but there was also strength in space stocks, new-era aviation and drones, quantum computing, uranium, small biotechnology, and a number of other themes. The Magnificent Seven MAGS also bounced back to a new all-time closing high with a gain of about 0.6%.
It was one of those sessions where market participants were in a positive mood and didn't care much about things like the economy, valuations, overbought technical conditions, or the long list of macroeconomic concerns.
It was a nice respite, but next week, we will return to reality, and there will be plenty of speculation about the upcoming interest rate decision and whether President-elect Trump's policies are going to create more inflation than growth. While there is still a high level of optimism about the economy, there are steady attacks on the optimists, and the danger of profit-taking in extended names is quite likely.
One important issue to keep in mind as we start the final month of the year is tax planning and positioning for 2025. There are some very big gains in individual stocks, but will investors want to forego taking profits as they hope for some friendly Trump tax policies?
Seasonality and momentum favor the bulls, but there is a very high likelihood of some bouts of profit-taking before we wrap up the year.
Enjoy the weekend and get that holiday shopping done early. I'll see you on Monday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
