T3’s Market Wrap: 24 Karat Magic in the Dow!
24 karat magic, don’t fight the feeling
This morning at 8:05 a.m. ET, someone Tweeted “Stock Market hits new Record High. Confidence and enthusiasm abound. More great numbers coming out!”
That someone was President Trump. And he was right.
Stock Market hits new Record High. Confidence and enthusiasm abound. More great numbers coming out!
— Donald J. Trump (@realDonaldTrump) November 30, 2017
More great were coming out, along with key support for the GOP tax plan.
The result: the Dow broke 24,000 for the first time ever.
He certainly wasn’t kidding about “more great numbers coming out.”
This morning, October Personal Income came in at 0.4% vs. the 0.3% consensus.
Jobless claims are still shockingly low at 238K.
And the November Chicago PMI was 63.9, beating the 63.0 consensus.
After that, Senator McCain announced his support for the GOP tax reform plan.
And the bears… they got tossed, Hulk-style:
Stocks built on early gains, and the S&P 500hit an all-time high at 2657.54.
The small cap Russell 2000 made its own record high 1551.69.
And the Dow broke 24,000 for the first time ever, hitting 24,327.87
The Nasdaq’s recent struggles kept it from setting a new high, but really, who can complain about a market like this? (unless you’re short)
Banks were strong on account of the impressive economic data, which boosted Treasury yields and the dollar.
The dollar strength put some hurting on gold, which fell -0.7%. Predictably, gold mining stocks were down as well.
Now, there was one really weird thing going on today.
Even though stocks were ripping midday, the VIX was rising as well.
As we explained in this VIX basics tutorial, the VIX typically rises when the market is weak — NOT when the market is strong.
In fact, the VIX went as high as 12.05 today, up 12.6% from yesterday.
Since the VIX is based on implied volatility readings on SPX index options, this implies that traders were paying up for put options today — something you rarely see on a strong up day.
Market statistics indicate high recent demand for call options.
Yesterday, the CBOE equity put-call ratio was just 0.52.
That’s way below the 0.655 long-term average, and it was basically flat from Tuesday’s 0.5 reading.
This means that traders aggressively bought call options yesterday.
The 10-day moving average is now 0.593, the lowest level since December 20, 2016.
The 3-day moving average, which measures very short-term sentiment, is just 0.543, a number not seen since December 12, 2016.
Meanwhile, over in cryptocurrency land, Bitcoin continued its wild ride today, going as low as $9,021.85 and as high as $10,681.85.
Take a look at the two few bars on this chart:
That, my friends, is a serious explosion in volatility.
So what’s next?
Well, traders definitely want to see the GOP tax bill go through.
A lot of the recent market optimism is based on a more favorable tax backdrop, so Washington better deliver.
Traders are already saying there could be a classic “sell the news” reaction to the passage of the tax bill.
But we’re living in an “anything goes” market.
Most people didn’t think we could get this far.
I think of a 95-year old man that’s been smoking 3 packs a day for the past 80 years.
If he’s made it this far… he can definitely make it to 96.
Read more by Soren K.Group
