Market Volatility Is Ramping Up, But So Are Trading Opportunities
I'm aggressively trading one small biotech stock as it receives positive news.
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After a brief pause on Thursday, the market is under pressure again Friday morning. Some of the selling is due to continued concerns about a more hawkish Fed and a sharp increase in interest rates and the dollar, but the potential of a government shutdown is adding an element of uncertainty and causing some folks to wrap things up and call it a year.
There are additional economic worries as investors await the PCE inflation data, which has the potential to make market players even less optimistic about additional interest rate cuts in 2025. After the Powell press conference on Wednesday, the market is now anticipating only two quarter-point cuts in 2025, and there is speculation that there could even be rate hikes a year from now.
The main reason for the pressure Friday morning is that efforts to pass a spending bill in the House have blown up. Elon Musk highlighted some of the spending and self-serving provisions in this bill, and that triggered blowback against Republicans who had previously indicated that they were willing to go along with the increased spending. The whole situation is now in turmoil, and it looks very likely that there will be a government shutdown.
Government shutdowns have occurred before, and while they have caused short-term uncertainty, they are always resolved and quickly forgotten. The problem for the market is that it is a convenient excuse for some investors to lock in gains from a good year and to go enjoy the holiday before they start fresh in 2025.
I continue to believe that conditions for a year-end Santa Claus rally are improving. There is more downside pressure that creates the potential for a snap-back, and many small-caps and secondary names are now deeply oversold. There are also indications of rotation out of the Magnificent Seven names and into the broader market, but it is choppy and inconsistent. I’ll be watching the Russell 2000 IWM closely for a reversal and will be working on my watch lists.
I’ve been discussing Humacyte HUMA, a small biotechnology name, for quite a while. After a long delay, the company received news that the FDA has approved its acellular tissue engineered vessel (ATEV) product. The stock is trading up about 60% in the pre-market, and I am aggressively trading it.
At the time of publication, Rev Shark was long HUMA and HUMAW.
