Another Seasonally Strong Day but Europe Should Not be Ignored

I hope everyone had a great Thanksgiving with lots of good food, family and friends. As I wore the hypocrite hat this year, we celebrated ours on Wednesday night so my daughter and I could fly to Oregon on Thursday to watch the UCONN men and women play in the PK80 basketball tournament in honor of Phil Knight’s (Nike founder) 80th birthday. The men played such a great game to beat Oregon last night, something I definitely did not expect. The fun continues.

Turning to the markets and the holiday-shortened half day, as Wednesday was seasonally a very strong day, the same can be said of Friday. Stocks rally most of the time and certainly much more than random. I expect to see new highs by most, if not all of the major indices. High yield bonds continue to look good. We’re seeing broad participation in the rally. Key sectors are strong. If I had to nitpick I would say that they semis look a little tired and are in need of a pause or small pullback.

One thing I want to continue to keep on the radar screen in the hugely big picture is that all is definitely not well in Europe. While Merkel did end up winning the German election, she did so with only 33% of the vote. And now she cannot form a coalition government. At the same time, there are many problems in the Spanish and Italian banking systems which few seem to be discussing or even caring about. This is not a here and now issue, but it will certainly be one of those big picture things to keep an eye on in 2018 as this could have widespread impact on the markets and economy.

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Long & Strong for the Bulls. Happy Thanksgiving!

The bulls were long and strong on Tuesday with all five major stock market indices hitting all-time highs. You just cannot argue with price momentum. Semis, discretionary and banks were strong while the banks were just okay. We saw very good participation when looking at the NYSE A/D Line. High yield bonds were up but they could not add to their first half hour gains. Commodities, led by oil, just finished a little pullback and seem poised for a run to new highs by year-end. Because transports also look like they are ready for run, it will be interesting to see if we can get oil and transports to run together.

The day before Thanksgiving is traditionally one of the strongest days of the year. Because of Tuesday’s big surge, I wouldn’t be surprised if we just saw a mild drift higher without much fanfare. And Friday, where stocks are only open until 1PM, is one of the slowest days of the year.

The biggest news right now is that Angela Merkel cannot create a coalition government in Germany. For years, I viewed the 2017 election as the single most important geopolitical event since 1999. When she won, people questioned my take. Remember, Merkel won with only 33% of the vote,  not exactly a strong mandate. Don’t underestimate her inability to form a government. Elections may be called again for 2018.

Finally, I want to wish all of our loyal and devoted readers a very Happy, Safe and Meaningful Thanksgiving! It’s my favorite holiday of the year with family, food, wine and football. This year, I am donning the hypocrite hat as we are having Thanksgiving dinner on Wednesday so my daughter and I can travel to Oregon to watch the UCONN men and women participate in the Phil Knight (Founder of Nike) PK80 basketball tournament. Whatever you do, hopefully you can pause and realize that there is always something to be thankful for.

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