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“Just because you make a good plan, doesn’t mean that’s what’s gonna happen.” – Taylor Swift
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
After a cruel summer sell-off that kicked off in August and all but erased the enchanted rally that spanned the months of May, June, and July, the market found itself in a delicate position in late October as the uptrend from the bear market lows in 2022 that we all remembered all too well were being tested. Right around Halloween, all bulls could think was, is it over now?
With the start of November, the market found some daylight, and despite the death by a thousand cuts of a strong dollar, higher oil prices, and rising rates in the prior weeks, bulls were able to shake it off in dramatic style and make it out of the woods from the red on hopes that the great war between the Fed and inflation was nearing a truce. It’s far from a love story, but as long as neither side acts up again, the bad blood between them has been set aside. Based on where futures are trading this morning, the S&P 500 Total Return Index will open at an all-time high, and if the rally keeps up, Fed Chair Powell will make the full transition from an anti-hero to mastermind in the eyes of the public. Never in most investors’ wildest dreams would they have thought we would be back to December feeling safe and sound and not far from all-time highs with nothing but blank space above. Were you ready for it?
This morning, it’s a subdued tone on the futures market as the market awaits the FOMC decision at 2 PM. PPI for November was just released and the results were generally weaker across the board. On a year/year basis, headline PPI dropped back down to 2.0%. The reaction from futures has been modestly positive, but how we finish will all depend on the Fed at 2 PM and Powell’s press conference at 2:30.
It hasn’t been the best-performing sector since the S&P 500 late-October low, but the 14.2% gain in the Industrials sector since the 10/27 close puts it modestly ahead of the S&P 500’s gain of 12.8%. As shown in the chart below, the rally puts the sector not only within 1% of its 52-week high but also its all-time high from August 1st.
Along with the steep rally, the Industrials sector is also on the verge of a golden cross formation where its 50-day moving average (DMA) crosses above the 200-DMA as both are rising. Technicians consider these patterns to be positive, but as we have pointed out in the past, returns for other indices and sectors following their own golden crosses have been mixed.
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