11/27/20224
Stock Indexes Record New Highs
The major stock market indexes made new highs on Monday. Today, Wednesday 11/27, those same indexes are selling off. The Industrials have made a new high, the SPX has recorded a double top, and the NDX NASD 100 is making a lower high. Seasonally the markets are usually up the days before and after Thanksgiving but not this time.
The so called Magnificent Seven do not look like a good buy which explains why the NDX is down today. The number of stocks above their 200 day moving averages on the SPX is down from the high set in October. This is very important. Yes, the overall SPX is up. That is because there are some stocks which are weighted more than the others in the index and they skew the index itself. The breadth of the market is not nearly what the index itself indicates.
The reality of Trump’s impending tariffs, the collapse of Chinese real estate, and weakness in Europe, especially Germany, has yet to be reflected in our markets. Other than Trump loyalists I do not find any economists enthused for his tariff threats. Recall the disastrous Smoot-Hawley tariffs signed 6/17/1930 happened at the rebound of the stock market that spring. It then fell from around 250 to 44 by July 8, 1932. The tariff disaster would not be solved until the General Agreement on Tariffs and Trade GATT was signed in 1947.
The biggest thing in the Permian Basin is the stock action of Texas Pacific Land which has tripled this year. It has been acquiring land in the Basin. This has led to increased oil production. With no debt, the stock price has risen.
The rise in West Texas Intermediate did not last. January 2024 futures have fallen back to $658.23. The contract touched $71.97 a week ago.
However our recommendation of Patterson PTEN and Transocean RIG. RIG hit $4.50 today. PTEN spiked to $8.70 and has pulled back to $8.47. In slow pre-holiday trading this is not unusual.
Last week we noted the ten year note rate rose form 3.6% to 4.5% since the Fed rate cut. It is now falling a bit in a counter-trend move. As rates bottomed in March 2020, I expect very long term rise in rates over the next 39 years. Trump has appointed Kevin Hassett as director of the White House Economic Council which is a very good thing. He is not a tariff enthusiast. Hassett was his top economist in his first term.
Check out my weblog www.themarketperspective.com for updates.
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