Behind the Numbers: Unveiling the Forces Behind the Market Rally
Algos, Stock Buybacks, and Retail Momentum—Elements of the Surge
VVIX:VIX ratio: Very close to a blue sky signal.
Some things that we should keep in mind-The catalyst behind this remarkable rally can be attributed predominantly to an unprecedented surge in algorithmic trading as highlighted by Goldman Sachs, noting an astounding acquisition of nearly $70 billion in US equities over a mere ten days—an unparalleled feat in Goldman's record. This buying frenzy was further amplified by a concurrent surge in stock buybacks, spanning a record two weeks until December 8, coinciding with the onset of the subsequent blackout period.
Additionally, a surge in retail momentum-driven purchasing played a pivotal role, marking the most substantial two-week inflow since February 2022, totaling $40.0 billion. It is worth noting that the market-leading mega tech group, particularly the illustrious Magnificent 7 names, continues to operate in a league of its own within the global market, serving as a compelling factor for the market's performance. As prudent investors seeking profitability, we remain actively engaged in this dynamic landscape. Short term traders could take profits here…
If it’s obvious, it’s obviously wrong.
-Joe Granville
In the realm of market regimes, GOLDILOCKS emerges as the preeminent Top-Down archetype. Functioning as a risk-on environment, GOLDILOCKS inherently favors investors who opt for heightened risk exposure. Within the parameters of portfolio construction under GOLDILOCKS, prioritizing High Beta over Low Beta, favoring Growth over Value, leaning towards Mega Cap Growth instead of Dividend Compounders, emphasizing Spread Products over Treasurys, and selecting High Yield over Investment Grade, are integral considerations. Presently, GOLDILOCKS forecasts a bullish three-month trajectory for Stocks, Bonds, and Bitcoin, while maintaining a bearish stance on the US Dollar and a soft bullish signal on Commodities over the same period.
The upward trajectory of gold prices in the near future hinges on a substantial decline in real interest rates and a weakening of the dollar.
Allow me to articulate through audio why this breakout surpasses any we've witnessed lately...