Serial Top Callers Help Fuel New All-Time High for S&P 500
The CPI data was a little hot, but economic bears are being crushed by positive price momentum.
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The CPI Report on Tuesday morning was mostly in line with expectations, but the cost of services was a little hotter than expected. Overall, Core CPI ticked up to 3.1% on an annual basis versus expectations of 3%.
The market didn’t care.
After months of constant warnings from the economic bears about how the economy was doomed due to aggressive Donald Trump policies, the bulls are no longer taking them seriously. The bears still insist that the impact of tariffs is about to hit, but fed fund futures aren’t buying it. There is a 94.4% chance of a quarter-point rate cut on September 17 and a 60% chance of another quarter-point cut on October 29.
A big part of the difficulty that the serial top callers are having is that they have been leaning the wrong way for so long. Each major news event is greeted with the hope that this is going to be the big one that sends the market cascading lower. When that doesn’t happen, they have to scramble to reposition and push the market higher once again.
Breadth was very strong on Tuesday, at around four-to-one positive, and new 12-month highs surged to more than 1,100 names. As I’ve been discussing for the past couple of weeks, there is an unusual amount of strength in secondary stock. Every day, my list of smaller names that are up more than 10% has been quite lengthy. That was reflected in the Russell 2000 IWM on Tuesday, which jumped nearly 3%.
The Magnificent Seven MAGS is still chugging along and hit a new all-time high again with a gain of more than 1%.
Many stocks may be technically extended at this point, but as the old saying goes, "overbought stocks can become even more overbought." Rather than trying to anticipate a turning point, the better approach is to stick with the trend until it ends. When it does end, you may suffer some losses, but they will probably be less than the opportunity cost of being bearish too early.
The biggest challenge right now is finding good entry points, but that isn’t a bad problem to have if you are riding some winners.
Have a good evening. I’ll see you tomorrow.
At the time of publication, DePorre had no positions in any securities mentioned.
