Last week the S&P 500 closed at a fresh new high while waiting for the stimulus package. The main street is suffering from the pandemic, yet the stock market doesn’t care. The stock market has made up its mind that it is a bull market no matter what!
As of now, the S&P 500 is 30.98% above its 200-week moving average. Look back at important tops, the S&P 500 closed 32.57%, 47.54% and 60.26% above its perspective 200-week moving average in Jan 2018, Mar 2000 and Aug 1987. So we are pretty close to the Jan 2018 overbought level that could cause the market to have a fast selloff in Jan 2021 when the Georgia senate race outcome is known. The street is hoping for the Republicans to win so the blue wave initiatives could be constrained, which could be a good thing in long term. Right now, all eyes are on this race because it could significantly impact the monetary and fiscal policies for the next two years.
We would not be surprised to see a knee-jerk selloff reacting to the senate race outcome. The selloff would be a good thing to work out the present overbought condition, therefore prolong a healthy bull market. It’s a strange feeling to wish for a 5-10% correction, but that’s a really healthy thing for the market.
Technically, it is seven weeks into the current weekly cycle. The half weekly cycle indicator has turned down, which means we could be in a sideways market for 1-3 weeks. It could be the pending senate race that’s kept institutions from putting money to work.
We reaffirm our bullish outlook for 2021 and any 5-10% correction should be bought if you still have capital to invest.
Last Friday KPTI announced FDA approval of 2nd line multiple myeloma based on BOSTON study, which was three months ahead of schedule. The stock price went up just a little over 8%, reflecting the street’s lukewarm attitude about the approval. The stock has been relentlessly shorted and the price has been really depressed. This approval should be the catalyst to bring the stock out of the monthly cycle bottom when it is closed above its 200-day moving average which is currently at 17.39.
Now the barrier is removed for the company to market the cancer drug to a much larger patient population, we believe this company is just getting started and it has the potential to become an important oncology player. We will hold the stock for a long term play expecting the company to achieve 10-20 billion market cap in the next 5-10 years.
We will take a break from publishing the blog for the holidays and will resume on January 3rd, 2021.
We want to thank our subscribers for following our blog and we wish you happy holidays!
All the best for your endeavors in 2021!