Good news is good and bad news is good. It doesn't matter one way or the other-- the markets are going up. Straight out: Yesterday's sell imbalance could be a hint about how the rest of November goes. With the S&P up 2.6% on the month and 27% on the year, some people are taking some profits. Yesterday a friend who used to run the Goldman Sachs (GS) prop trading desk sent us this. It basically says exactly what I have been talking about for the last 10 days: out of bonds and into stocks.
Retail Investors: Start Your Engines
"Bond fund outflows last week were -$9b. Equity fund inflows were +$6b.If the S&P does indeed close 2013 up +26%, then financial advisers will tell their clients that the previous 12 times the S&P was up +26% in a year, it increased +10% on average the following year."
We think the S&P pulls back in 2014, but that could be weeks, if not months away. It's an absolutely stunning rally, and as we said, until we see an overall change in the price action we see no reason to fight it. We could see a few days of sideways to lower price action. Part of this is due to the low level of trade and the other is the S&P needs to pull back a bit before going back up. We lean to selling the early rally and buying weakness with tight sell stops. Both today and Wednesday will be full trading days, with U.S. markets closed Thursday for the Thanksgiving holiday.
As always, use stops and keep an eye on the 10-handle rule. Don't forget to catch MrTopStep on The Closing Print video found under the OptionsTV page (top bar). We report directly from the SPX pits, wrapping up the day and positioning for trade tomorrow.
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