Thanks Giving Week
The Holiday Season is officially here. The tug-of-war has begun.
Often, the Holiday Season brings a Santa Claus rally. Between now and Christmas, it’s common to see stocks rise as consumer spending drives the retail sector of the economy.
Not surprisingly, 2022 may buck the traditional trend. While the news narrative post-election seems to be improving, there are still a lot of structural concerns under the hood of the markets. And a Holiday-shortened week often exacerbates these.
The tricky part about a shorter week is that volume tends to drop. On the surface, this may suggest things should be calmer. In practice, this is often not the case. With fewer participants in an auction, it can be easier to push one direction or another based on the aggressiveness of the buyers or sellers. In effect, there are fewer opinions to balance things out. So you can get more exaggerated directional moves.
The setup remains precarious. Stocks in general had a strong October rally. It seems the news cycle has somewhat shifted from ‘maybe a recession’ to ‘mild recession’ now though. So volatility may stand to rise. The VIX continues to hover around 23. This value has been a tell for market reversal several times this year (and if the value of the VIX drops below 20, the probability of a market decline has been almost a sure thing for most of 2022).
Don’t look to guess the numbers right as to where this market is headed this week. It’s tricky enough just to call the direction right now. Early indicators are this thing is headed lower though. High beta stocks are pointing to significant drops at the open. SP500 futures are suggesting a drop. And, with markets closed on Thursday and only open for part of Friday, it’s likely most of the trading for the week will be crammed into the first three days of the week (the majority probably being on Monday and Tuesday).
All of this suggests a set-up for a more aggressive move this week. And, so far, that move appears to be negative.
Regardless of the market’s move this week, I encourage you to take a quick inventory of the blessings in your life. For most of us, it’s not perfect, but there’s a lot to appreciate. It’s not the stuff that matters – it’s the relationships. Cheers to a Happy Thanksgiving!
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