“November is shaping up as 1 of the best months for stocks in history” — Paul Ebeling
What happened last week
The economics came in good. Jobless claims rose to 742,000, the 1st rise in 6 wks, continuing claims fell to 6.372-M. The Philly Fed beat at 26.4 (25 was expected). Existing home sales posted a record. This was nothing that the market did not expect.
Then Thursday, Senators Schumer and McConnell appeared to agree that there is need for more aid/relief/stimulus and may work to pass a new stimulus bill sooner, rather than later. Perhaps as early as this Thanksgiving week.
S&P 500 put in a new closing high on Monday. It then tested back below the 10-Day EMA intraday Thursday and reversed North for a gainer. Super action to test the breakout from its 3-month base, it needs to resume the move this week.
NASDAQ opened last wk at the 10-Day EMA, faded and then reversed for a solid gainer. No breakout, meaning that the NAS Comp is still below the Monday high, as well as the November and October highs. Currently, it is in a great position and has a higher low near support. While it received some leadership on the day, it needs the big-cap tech stocks to participate to get the next breakout from its 3-month pattern.
You might have thought that rising coronavirus cases and turmoil atop the government would breed at least the beginnings of caution among traders and investors. Not so.
In what is shaping up as a historic month for equities, ETFs (exchange-traded funds) focused on US stocks were just hit with one of the biggest deluges of cash ever recorded, attracting nearly $53-B in November.
The cascade of money explains any number of market trends, not just the strength of gains.
November could easily be the 4th-best month for the S&P 500 in 20 yrs.
Investors are viewing this as an opportunity to buy the dip in sectors that have been battered by the medical emergency chaos.
This is likely to continue given that piles cash are still parked in money market funds. Nearly $1-T flooded into the ETFs from February to late May as chaos gripped markets, ballooning US money-fund assets to a record $4.8-T, that pile has shrunk to roughly $4.3-T well above pre-virus levels.
Now, with the end to COVID in sight, we expect that the cash stashed in money-market funds will continue to fuel stocks after months of sitting in money-market funds that yield next-to-nothing investors may be looking to eliminate the cash drag from their portfolios heading into year-end.
This is the time where people are introspective and are saying, “I might have had cash, but cash is not the solution long term”
A lot of the moves we have seen is positioning going into next year, almost as a clean Bull slate.