Eight Straight Days of Gains by the S&P 500… a Winning Streak not Seen Since 1997: Market Commentary from Cabana’s CEO – November 8, 2021

4 weeks ago

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Equity markets continue upward on the back of strong earnings. Most of the companies (81%) in the S&P 500 that have reported, beat analysts’ forecasts. A blowout jobs number on Friday and muted response to the Fed’s announcement of its intent to taper bond purchases, have also contributed to eight straight days of gains by the benchmark S&P 500 (SPY). This is a winning streak not seen since 1997.  

All this reflects the continued belief that the economic recovery remains on track and that the Delta variants’ economic damage may be coming to an end. Bond yields have remained rangebound, which implies investors are setting aside inflation fears fueled by supply chain issues. All in all, it is hard to argue for a better four weeks than what investors just had.  

Markets don’t go straight up forever, and we are due for a pause. I think equities are technically overbought. I said the same thing last week and the streak rolled on. This is a good example of how markets can stay overbought for long periods of time (just like they can stay oversold for long periods of time). This also explains why it is so difficult to “time” tops and bottoms of trends. 

Today’s big losers included Tesla and Amazon. Tesla dropped more than four percent on news that Elon Musk conducted a Twitter poll with results indicating that people wanted him to sell 10% of his shares. Why this matters at all and why he would do such a thing is beyond me. Amazon dropped nearly one percent and led other retail stocks to the downside, on an otherwise up day. This hurt the consumer discretionary sector and benefitted cyclicals like industrials and energy. Even within general trends, there are relative winners and losers.  

Disclaimers

February 23, 2021

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