Investors Seek a Reason to Embrace Positive Seasonality
Bulls need upside catalysts to trigger buying as indexes struggle.
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The market sold off in November following negative reactions to good earnings reports from Nvidia (NVDA) and Palantir Technologies (PLTR) . Both reports were solid, but they raised questions about the profitability of AI and the valuation of the major players. News of a new chip from Alphabet (GOOGL) helped stabilize the group, but questions remain for the sector.
Stocks recovered during Thanksgiving week primarily on growing confidence that the Fed will cut interest rates at its next meeting on December 10. There is some economic data due before then that could impact the decision, but currently, the odds of a quarter-point cut are at 87%. The bigger question is what will happen at subsequent meetings.
Two issues weighed on the market Monday. The first was continued liquidation in the cryptocurrency market. Bitcoin (IBIT) is now down about 30% from its highs and struggling to hold key support. An index that tracks the bottom half of the largest 100 digital assets is down almost 70% this year.
The second issue that hit was pressure on bonds caused by hawkish statements from the Bank of Japan. The 20+ Treasury Bond Fund ETF (TLT) suffered its worst day in a while, and is causing some concern.
There is a mild rebound early on Tuesday, but the biggest obstacle to better market action is a lack of a catalyst. The Fed interest-rate cut is largely priced in, there are few major earnings reports, and the economic data are mixed.
Investors are very aware of the positive seasonality that occurs in December, but they need a reason to embrace the market and to start buying. While AI leadership is impaired, there was some movement into the safety of Apple (AAPL) on Monday. The Magnificent Seven (MAGS) is rebounding on Tuesday morning, but can the group regain its status as market leaders?
The bulls need news flow to motivate them to embrace positive seasonality, and there doesn’t appear to be much on the horizon. The best course of action is to remain patient and watch the price action.
At the time of publication, Rev Shark had no positions in any securities mentioned.
