Daily Commentary: November 05, 2021

Jeremy Engelbrecht1Option Commentary

New Market High – I Like Stocks In This Sector

Posted by Pete Stolcers on November 05

The S&P 500 is making a new high this morning on strong economic news this week. ISM manufacturing, ADP, ISM services and the Unemployment Report all came in better than expected. Hawkish Fed comments this week have not deterred buyers and the year-end rally is on.
What an incredible concept, when you stop paying people to stay home, they go back to work. A month after the federal unemployment assistance ended, we added 541,000 jobs. There are over 10 million job openings and labor shortages across every industry. I can’t stand politicians (BOTH PARTIES) and their idiotic policies.
I watch the wage component closely because it is the biggest contributor to inflation. Hourly wages increased .4% with is a little hot, but lower than the .6% increase last month. The economic releases this week should pave the way for Fed tightening in 2022.
The initial shock to tightening is bearish for the market, but we don’t have to worry about that until the middle of 2022. If the rate hike does not slow economic growth, the market will start to move higher even though rates are rising. Contrary to popular belief, some of the best rallies have happened when rates are rising. The concern is that economic growth will remain sluggish and that inflation is the reason for higher interest rates. This is not anything we need to worry about now.
Seasonal strength is keeping buyers engaged and the year-end rally is on.
Swing traders can buy IWM on the open today. That is the Russell 2000 and small caps have lagged this rally. It had a breakout above major technical resistance yesterday and valuations are still reasonable relative to SPY and QQQ. Use $234.50 as your stop.
Day traders should not chase the opening gap up. Be patient and wait for your window. I do not like buying gaps up to a new all-time high so I will wait for at least the first 30 minutes to see if there is some retracement. It has been very hard to make money on shorts. If the market dips, wait for support and buy.
This rally has come on light volume and it certainly feels like a buying climax. Join the momentum and focus on overnight swings and day trading.
Support is at SPY $460 and resistance is at $470.

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