Republic Risk: A Short Day with Tech/Retail In Focus

By the time this market closes, I'll be on a bus from the rental car facility to the airport. Let's hope for a continued seasonal trend that carries us into Christmas, and not risk-off December.

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Equity Index Strength Is GREEN on the S&P 500 and GREEN on the Russell 2000

Each morning, we assess the full flows of the market by measuring statistical metrics on a very specific number of stocks to determine broader sentiment and the momentum trend. When these readings turn red, we focus on cash, build trades around positive sectors, or take inverse positions against indices. When it is positive, we focus on short-squeeze stocks, companies with improving fundamentals, and trading/investing around the actions of corporate insiders.

The dumbest day in capitalism kicks off this morning on Black Friday, the annual celebration where people fight in store aisles over televisions two years behind in technology. Good luck to this year’s participants, and "may the odds ever be in your favor." That said, as I write this, my wife came in with an Amazon.com shopping list for my daughter. Hilarious. 

This morning, markets are flat in what will be a short trading day. Everything shuts down at 1 pm so that we won’t have a deep enough recap on the state of retail this morning. This will be the most watched Black Friday to Christmas retail stretch, so retailers will be pressured to generate sales and help produce a Santa Claus rally.

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Morning Notes:

• Reports are swirling that Elon Musk's SpaceX is gearing up to sell shares next month in a deal that would value the company at about $150 billion, maintaining its valuation from earlier this summer. These moves suggest SpaceX is not yet eyeing a near-term IPO for its Starlink unit, which provides global high-speed internet​.

• Hedge funds lose $43 billion in short-selling as S&P 500 marks its best month since July 2022, triggering a market-wide short squeeze.​ This is where we remind everyone that we are always watching for oversold conditions on the S&P 500 SPDR (SPY) on the RSI and MFI as potential trigger points for dip-buying and a short squeeze.

• A record 211,000 put contracts for Brent Crude Oil were traded on Wednesday as OPEC+ rescheduled its November 25 meeting to November 30.

• China's Zhongzhi Enterprise Group, a prominent figure in the shadow banking sector, has announced insolvency with liabilities up to $64 billion. This is another blow to China’s broader financial system, particularly the already stressed real estate market.

• NVIDIA (NVDA) shares are under pressure this morning due to delays on the new AI chips that must meet U.S. export requirements to China. The latter’s sudden policy reversal is intriguingly linked to the harsh technology provisions slapped on U.S. companies selling advanced technology to China. 

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Dear Fellow Expat:

We are heading back to Florida today - thank goodness - as I’ll finally be able to sleep in my bed after a week. I’m unsure about the Eastern Seaboard, but it doesn’t knock me out. As we barrel toward December, markets remain strong, and more investors are betting on rate cuts coming sooner rather than later. I’m your voice of caution - as we’ve heard this story a few times in the last 18 months - and one bad data point or one convincing Jerome Powell speech has sent the market in reverse. I am not convinced we’ll see the S&P 500 collapse by 50%, but I think a few corrections will happen next year - much like we saw in the last two years. The real fireworks begin when the Fed starts to cut interest rates - as it will suggest economic weakness ahead. They’ll try to coordinate with the U.S. Treasury on the matter. 

This morning, I’m more focused on the energy sector. OPEC+.

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