All indexes set new highs for the week ending 10/11/24. I am surprised, to say the least. Volume on both the S&P 500 and the NASDAQ Composite was extremely light. Money was flowing into the Small Cap Russell 2000. It was a big Friday, as I mentioned months ago. However, the volume was also light here. Small-cap stocks are the place to be now and into 2025.
It is never a good sign when there is light volume and new highs for any market or stock. This confirms what I have been saying for the past four weeks: institutions will not commit serious money to the market until a winner is officially declared post-election. The stock market does not care who the winner will be. What institutional money cares about is the makeup of who wins.
What would be detrimental for the stock market is a sweep of the presidency and both chambers of Congress. This creates tremendous policy changes. When policies change, so does institutional investment. Remember I said that, as it is very important!
The CPI report came out a bit warmer than expected. The stock market didn’t seem to care. Unemployment claims came in higher than expected, but that most likely was due to the hurricanes.
What is important to watch is interest rates and the Federal Reserve. Powell (Chairman) said at the National Association for Business Economics that he is committed to lowering interest rates moving forward but at a pace of ¼ of a point at a time. So, we might see rates drop an entire point by year-end. A dovish Federal Reserve is good news for the stock market and also good news for both Upstart and Opendoor.
Upstart and Opendoor were both up significantly on Friday. Upstart’s volume was approximately 10% above its average daily volume, while Opendoor’s traded at its average daily volume. So, neither is a big deal. I have been saying for months that Upstart’s big move, if market conditions remain the same, should be into year-end and 2025. Opendoor, however, is most likely mid-year 2025. Opendoor is about 1-2 quarters away from the bottom of its business cycle.
All markets are at a very fragile point. Right now, all exchanges have not seen selling in over 5 weeks. They seem to be saying, who is going to sell first and then they will join in.
What is the catalyst that will create the selling? I don’t know! I thought there would be some selling into the election, or the war would and that didn’t happen. What did happen, the buying has dried up.
So rather than looking into next week, let’s look into 2025. There is a tremendous amount of cash sitting in money market mutual funds. About 6 trillion. Yes, that’s the correct trillion with a T.
I am a buyer of weakness, looking forward to 2025. I feel any weakness will be short-lived.