When I’m debating buying, or selling, positions, I weigh the bullish and bearish signals I’m seeing in the stock and options markets. Here is what I’m seeing for the bull and bear cases right now …
Bullish
First off, the S&P 500, Dow and Nasdaq are within 1-2% of all-time highs. And as the old Cabot saying goes, the most bullish thing a market (or stock) can do is make new highs.
The Chicago Board of Options Exchange Volatility Index (VIX), which is often referred to as the “Fear Index,” has pulled back nicely as of late and is back in a “safe spot” at 16. This essentially means big options traders are not racing to buy protection against a steep market decline.
My watchlist of potential next buy candidates has been growing as of late, which is always a bullish sign. This watchlist includes stocks like Alcoa (AA), Lyft (LYFT), Walmart (WMT), Urban Outfitters (URBN), Credo (CRDO), Caterpillar (CAT), and many more.
Historically, the bullish set-up is there, as @RyanDetrick on X noted this week when he wrote:
“S&P 500 up more than 5% YTD heading into December? Turns out if it is also year one of the Presidential Cycle stocks have never been lower since WWII. That is 12 for 12 higher.”
And finally, there was a fairly nasty sell-off in late November, and all of a sudden, the bears were shouting “Bubble!” “Top” and more. Yet very impressively, the bulls stepped up and bought the somewhat scary dip, and now the indexes are back near their highs. I really liked to see the recent snapback rally in the face of fear.
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Bearish
Oracle (ORCL) has been one of my big worries the last several months, as the former AI leader has seemingly fallen every day for months. I hate to see the market leaders fail … and on that note, Microsoft (MSFT) and Meta (META) don’t look so hot either.
And while not as big a leader as ORCL, there have been plenty of other well-known hyper-growth stocks that have been under pressure as of late. Some that I’m watching are ALAB, DDOG, and NET, all of which have lost their momentum even when the market has been strong.
Quite a few sectors look bad, to just “meh,” including Restaurants, which look awful, Homebuilders have been bad though are perhaps improving, and Software, which looks very suspect.
And finally, while it’s assumed the Federal Reserve will again cut interest rates next week, if the central bank does not cut, or signals that they won’t likely do so again soon, it’s possible the market could unravel yet again.
Stepping back, I think the market heads higher into year-end as historically we are entering a bullish time of year, and the bullish signs I noted above outweigh the bearish … for now.
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