Rocket Equities & Options Report 11-27-23

November 27th, 2023

by Tommy O’Brien

The market has now roared higher with the ES trading from 4,122.25 on October 27th to a recent high of 4,580.50, that’s 458.25 ES points, or a 11.12% rise in about 1 month. The NQ just went from 14,140.25 to 16,173.50, a rise of 2,033.25 points or 14.38% in one month. This has all occurred with yields dropping dramatically. Yields on the 10 Year Treasury have dropped from above 5% to 4.43% as of today. The market has reacted accordingly.

I’m including a chart from Bloomberg this morning looking at market expectations for cuts in the coming year from the Fed. There is now a 60% chance that they cut by 0.25% by May of next year, that’s up from about a 29% chance as of the end of October. So, since the market has priced in Fed cuts that likely start in May and continue, the market has popped 11-15%. Expectations are now priced in, and we will see if the market still has room to run or if it struggles with the new lofty valuations even with rates and inflation still elevated.

We get the PCE on Thursday, the Fed’s preferred inflation gauge. And then we get non-farm payrolls next Friday, December 8th. The Fed meets again Wednesday, December 13th, which is just 2 weeks from this Wednesday.

We get some Fed speak this week with many governors making planned remarks, and will hear from Chairman Powell himself on Friday December 1st.

The market looks to test the recent highs of 4,634 from July of this year. 4,607 would also be a 1 to 1.618 expansion of its recent pull back and trade to higher price.

Bitcoin is having quite a moment, and with both FTX and Binance now ‘taken care of’, it seems like the industry may be ready for the next leg higher.

The NQ is pushing all time highs

Crude looks like it is on its way back to the $70 range

Gold has been consolidating in the $1800 - $2000 range for more than 3 years. If yields are going down, and that will bring weakness into the DXY, then we could see Gold push higher here and breakthrough this consolidation area to the upside.

The 30-year Bond may look cheap, but it is important to realize that prior to 2008 it actually traded below this price level for most of that time.

The 10 Year looks cheap on a longer term monthly chart, but that data only goes back to 2003.

This ES chart keeps me on my toes as there would be nothing wrong with a pull-back here at some level in the next few years, almost a regression to the mean.

This VIX is back to $12.85 and is trading like we are pre-pandemic.

Stay tuned for updates as volatility is cheap right now and there may be some opportunities this week, especially ahead of the PCE on Thursday morning.

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