Possible Deal to Reopen Government Saves the Market From Further Carnage

It was looking like a second day of doom-and-gloom on Friday, but talk of a possible deal to reopen the government brought in buyers at midday and provided a catalyst for steady buying all afternoon. While the indices didn’t manage any significant gains, the losses were pared back and the mood turned positive.

At the closing bell, the S&P 500 was close to flat, the Nasdaq 100 (QQQ)  was still negative, but the Russell 2000 (IWM)  was up 0.6%. About 55% of stocks managed gains, and there were around 100 new 12-month highs. It wasn’t a day for significant gains, but it certainly was better than the way it looked early in the day.

The question now is whether the lows on Friday will hold as a support level. There was some brutal selling this week, with many stocks breaking key support. The main problem was concerns about AI valuations, which spilled over into growth stocks and speculative small caps. The stocks with the best relative strength in recent weeks were the primary victims of the most aggressive selling.

If the politicians manage to cut a deal to reopen the government next week, the bounce should continue, with buyers searching for quality stocks that have been unfairly punished by the broad selling in indices and ETFs. Keep an eye on Bitcoin as a proxy for the most speculative names. If Bitcoin catches a bid, traders are likely to return to sectors like quantum computing and nuclear power.

Like everyone else, I took some hits this week, but I feel good about the opportunities that have emerged. If we see some positive seasonality over the next six weeks, I expect to catch some good moves. I’ll be updating my shopping list next week.

Have a great weekend. I’ll see you on Monday

At the time of publication, DePorre had no positions in any securities mentioned.