Yesterday was a fairly uneventful day, with the S&P 500 falling roughly 20 bps. Meanwhile, the 2-year auction at 11:30 AM was fairly ugly, with the new issue tailing one bps, while indirect acceptance fell to 57.4% from 62% last month.
The 5-year auction saved the day, coming in line with the when-issued trading rate and an indirect acceptance rate of 65.5%, which was better than last month’s 61.5%. Today, the 7-year auction will come at 1 PM.
It isn’t entirely unclear at this point, but it appears we are consolidating and pretty much topping out at these levels based on the Nasdaq futures. The future contracts have traded sideways since November 15, and that isn’t saying much for a market that is supposed to be going higher.
S&P 500 Remains Below July High
Meanwhile, for the S&P 500, as I have noted a few times now, I think the rally off the October low is a 3-wave structure and is a retracement of the declines from the July peak. At this point, this still seems valid, as the index remains below the July highs and, like the Nasdaq, appears to be churning.
If that is the case, I have no evidence to change my opinion, the lows of October, around 4,100, should be undercut. That may be a hard thought process for many to swallow, given what we have witnessed and all the other chatter from many other sources.
However, given my data and my understanding of market mechanics, fundamentals, and technicals, this is my belief. Additionally, I work in isolation and do not rely on what others think, and I like to form my own opinions.
At least for today, the CDX High Yield Index increased, and it will need to continue to rise for my opinions on the S&P 500 to prove correct. Stocks, after all, are merely a derivative of the credit market, and where credit conditions go, stocks are likely to follow, especially when considering the earnings yield of the S&P 500.
This week could see things pick up, especially with more economic data, a PCE report, and Jay Powell. Depending on how all of this goes, we could see these spreads widen further, and if that happens, stocks will reverse lower as spreads widen, pushing implied volatility higher.
Shopify Reports Strong Black Friday Sales
Meanwhile, Shopify (NYSE:SHOP) had a good showing today after reporting strong black Friday sales metrics for its merchants. The stock has performed very well, and while its RSI is over 70, the Bollinger Band shows it could still rise some more, as it doesn’t appear to be overbought yet.
If it can clear $75, it has a chance to fill the technical gap at $89 from February 2022. Members of my services know I have owned this stock since June 2022, when it was trading around 5x sales.