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Sizing Up the S&P 500

  • S&P 500 challenges trendline along yearly peaks.
  • Index on pace for monthly gain of about 9%
  • Retail money market funds have $1.686 trillion of cash. Up 75% from May 2022 and 12% from July 2023.
  • VIX holding near pre-pandemic levels under 13.
  • 5-week winning streak matches similar runs in May-June, late 2021, summer 2020.
    • Last 6-week streak was October-November 2019.
  • RSI overbought
  • Potential levels:
    • Up: 4637 (March 2022 high)
    • Up: 4607 (52-week high)
    • Down: 4528 (9/27 outside candle low)
    • Down: 4515 (September weekly closing high)
S&P 500, daily chart, with select levels and Wilder’s RSI.

Key News

  • Investment Company Institute: Record cash in money market funds
  • Energy headwinds:
    • Venezuela boosting production as U.S. sanctions end
    • Petrobras (PBR) spending $102bln on capex over next 5 years
    • Bloomberg: Russian crude exports +370K barrels / day before OPEC+ meeting
    • Crude oil inventories continue to grow
    • Tom Kloza: Gasoline and diesel demand falling
  • Strong Black Friday data:
    • National Retail Federation: 200.4mln shoppers in 2023, up from 196.7mln in 2022
    • Mastercard SpendingPulse: E-commerce +8.5%
    • Adobe Analytics: E-commerce +7.5%
  • Fedspeak:
    • Waller dovish: More confident inflation is falling. Rates could go down if inflation keeps falling based on policy rule. “No reason to say we will keep it really high.”
    • Bowman hawkish: Too early to declare victory
    • Barkin hawkish: “You want to have the option of doing more on rates.”
  • S&P Global PMI potentially dovish
    • 1st drop in private sector employment since June 2020
    • Cost pressures rise at slowest pace in almost 3 years
    • “Manufacturing firms noted greater efficiency in production.”
CME’s FedWatch Tool showing expected interest rates in May 2024. Notice the change in probable rates.

Sector Watch

  • Precious metals rally on Fed pause hopes, weak U.S. dollar
  • Real estate investment trusts lead S&P 500 in the past week
  • Broad strength in financials: Banks, private-equity
  • Homebuilders leading in the past month
  • Energy continues to lag. Is only major sector with 8-day EMA under 21-day EMA
  • Chinese stocks losing relative strength

Inflation in Focus

  • Cleveland Fed Nowcast sees November CPI at 0% on Tuesday, 12/12
  • Potentially deflationary trifecta: shelter, autos, energy
  • Rent prices fell slightly in October sequentially and year-over-year.
    • “Below-normal demand, increased inventory” cited
    • Y/Y prices negative in 3 of the last 6 months following 36 gains April 2020-April 2023.
  • Car prices:
    • Cox Automotive: Manheim Used Vehicle index -6.9% Y/Y
    • Kelley Blue Book: Discounting likely in December
    • Echoed by anecdotal dealer reports (“Ray and Zach”, “Flying Wheels” on YouTube)
    • Last CPI: New car prices -0.2% Y/Y (biggest drop since August 2020)
  • Select CPI basket weightings from BLS:
    • Shelter / Rent: 35%
    • Energy: 7%
    • New cars: 4%
    • Used Cars 2.6%
  • WMT conference call: “We may be managing through a period of deflation in the months to come… It’s better for our customers… We may see dry grocery and consumables start to deflate in the coming weeks and months.” (CEO Doug McMillon 11/16/23)

Mover of the Week: Stride

  • For-profit alternate education company broke out in October after 4 consecutive earnings beats
  • Profit, revenue, guidance surprised to upside
  • Benefiting from new education rules following pandemic lockdowns
  • LRN +92% YTD
  • Market cap = $2.5 billion

Upcoming Events

  • Earnings tonight: DELL, ULTA
  • Fri 12/1: ISM manufacturing, Powell speaking (Spelman College)
  • Tue 12/5L ISM services
  • Wed 12/6: ADP, crude oil inventories
  • Thu 12/7: Jobless claims

Using the Platform

Find Intermediate-term highs with “In Range Multiple Days” custom indicator.

  • Load in RadarScreen or Scanner
  • Change study_period to 63 days (3 months) or 125 days (6 months)
  • Sort by “InRng”
    • Higher values mean prices are higher in the time range.
    • Notice how megagaps are mostly under 90%
    • Visa (V) top ranked $500bln stock

Security futures are not suitable for all investors. To obtain a copy of the security futures risk disclosure statement Investment and Trading Disclosures Booklet – Futures. Exchange Traded Funds (“ETFs”) are subject to management fees and other expenses. Before making investment decisions, investors should carefully read information found in the prospectus or summary prospectus, if available, including investment objectives, risks, charges, and expenses. Click here to find the prospectus.

Options trading is not suitable for all investors. Your TradeStation Securities’ account application to trade options will be considered and approved or disapproved based on all relevant factors, including your trading experience. See Characteristics and Risks of Standardized Options.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.