The market started the week on a positive note when Moderna (MRNA) announced it had developed a highly effective Covid vaccine but that was the high point for most of the major indices. The S&P 500 and DJIA drifted lower all week and closed near their low points.
Overall it looked like rather lackluster, but if you dug a bit deeper there was some extremely strong speculative action under the surface. Money kept flowing into names in the electric vehicle sector, SPACs, and a variety of other small-cap names. There was some very energetic chasing that belied the dull action in the major indices.
In addition to the strong action in speculative small-caps, there were some reversals in the recent rotation action. The FATMAAN names bounced back a little and growth stocks saw inflows as value names experienced some profit-taking.
Most notably, the macro news flow didn't seem to matter watch. There is optimism about the vaccines being developed but distribution will be challenging and there is no clarity on how long the process will take. In the meanwhile, we have to deal with a surge in Covid cases as we head into the Thanksgiving holiday.
The election issues don't seem to be having any impact on the market right now, while there still is some hope that a fiscal stimulus deal will be done. Congress will also have to work out another deal to raise the debt ceiling to prevent a government shutdown.
Thanksgiving week is often a favorable environment for small-cap trading. We may have seen a preview of that this week. Traders often make that sort of thing a self-fulfilling prophecy.
This is an interesting market. It may look downright dreary if you simply look at the indices, but is extremely energetic if you focus on certain subsets of stocks. Take a guess which one I'm focused on.
Have a great weekend. I'll see you on Monday.
