The market is shrugging off some mixed economic news this morning as positive seasonality drives the indexes higher.
New home sales were stronger than expected, sentiment was weak, and PMI was weak, but the inclination of this market right now is to view weak data as a sign that the Fed may relent with its hawkishness and strong data triggers hope that a soft economic landing will develop.
There even has been a slight uptick in the chances of a 0.75% hike at the December meeting to 29%, but there will be other important data to consider before then.
What is happening today is that traders are chasing index ETFs higher. Action in individual stocks is very sedate with few big movers, but breadth is 5-3 positive, and the Nasdaq 100 (QQQ) is leading with a gain of more than 1%.
Traders are very aware of the high odds of success when they buy an index at the close on Tuesday and hold until the close on Friday during Thanksgiving week, but they are also very aware of the chances of a reversal on Monday. The question is, how far will they push at this point before they take profits and start positioning for a pullback?
The economic news isn't really supportive of strong buying, but it feels that way because of seasonality. If you are chasing this strength, be ready for some increased volatility as things become more overbought, and we move toward the end of the holiday period.
I sold down my Direxion Daily S&P Biotech Bull 3X Shares (LABU) trade and am disappointed we don't have more speculative action in individual stocks. The bulls are gunning the indexes right now and running over any bears that are not respecting the seasonal inclinations.
