🐻The Market’s Been So Bullish, It’s Time to Think Bearish
RJ Hamster
Good morning. Since the end of October, markets have swung from being oversold to overbought, as measured by technical indicators such as the relative strength index. An overbought stock or sector is one thing. For an index as a whole, a pullback seems likely.
Yesterday’s decline alone won’t cut it. Markets need a drop necessary to get off of overbought conditions.
For now, it may be prudent to look at ways to hedge, from taking highly volatile positions off the table, or writing covered calls on existing positions. From here, a 3-5 percent pullback from the recent high would allow the longer market rally to come back even stronger in 2024.
Recent economic data shows that inflation is slowing. And that consumers are holding up well, as is the job market. That suggests the economy could trend higher next year.
Should that happen, there are a number of companies that stand to benefit. That includes companies that cater to the movement of goods and services across the economy. These companies have seen a drop with a slowdown in spending on goods in 2023, but stand to see improving conditions next year.
Douglas Pertz, a director at Vestis Corporation (VSTS), recently bought 10,370 shares. The buy increased his stake by 78 percent, and came to a total cost of $200,627.
This marks first insider activity at the uniform rental and purchasing company since it went public in October, as part of a spinoff from Aramark (ARMK), as company directors and executives have refrained from making any changes in their holdings so close to the spinoff.
Shipping giant Nordic American Tankers (NAT) is up 32 percentover the past year, beating the S&P 500’s returns by about 50 percent. One trader sees shares continuing higher in the next few months.
That’s based on the February 16, 2024 $5.00 calls. With 57 days until expiration, 9,866 contracts traded compared to a prior open interest of 144, for a 68-fold rise in volume on the trade. The buyer of the calls paid $0.23 to make the bullish bet.
Applications for a mortgage dropped 1 percent last week, and are down 18 percent compared to a year ago. Applications to refinance an existing mortgage dropped 2 percent, following a 19 percent rise. The move occurred even as mortgage rates continued lower, averaging 6.83 percent last week, down from 7.07 the week before.
The Internal Revenue Service will waive nearly $1 billion in late-payment penalties for Americans who still owe for the tax years 2020 and 2021. Nearly 4.6 million individual payers still owe for those years. The agency hopes to obtain the payments without further delays. Affected taxpayers will receive notice from the agency soon.
Southwest Airlines (LUV) has reached an agreement with the union representing its pilots. The deal will have to pass a vote from the union’s 11,000 members, and will come to a total of nearly $12 billion in higher pay. Other airlines have recently reached deals with their pilot’s unions.
Affirm Holdings (AFRM) will start offering its “buy now pay later” option for those using self-checkout kiosks at Walmart (WMT). The plan expands on the company’s existing business with Walmart, which is a key customer. Shares jumped nearly 15 percent on the news.
Identity and access management company Okta (OKTA) is acquiring privately-held competitor Spera. Estimates for the final deal range from $100 to $130 million, contingent on Spera hitting certain milestones. The acquisition will improve Okta’s identity threat detection and response capabilities.
S&P 500 MOVERS
TOP
LBTYA
2.264%
CVS
1.993%
LBTYK
1.672%
JCI
1.312%
GOOGL
1.182%
BOTTOM
FDX
11.886%
AON
5.794%
MOS
5.4%
CZR
5.391%
DXCM
5.288%
QUOTE OF THE DAY
This bias of buying stocks is taking hold. And unless news changes it, we’re probably going to drift higher every single day because of it.
– Kim Forrest, founder at Bokeh Capital Partners, on how the recent market rally, improving economic data, and seasonal patterns are creating a perfect storm for stocks to continue higher in the final trading days of the year.
