US Stock Market Has Just Had The Strongest 4-Day Rally Since 1933

In Friday’s post-US Thanksgiving shortened session; volume was the lowest of the year, prices did side-track until 11:20, and there was an upward bias into the close, rising +120 points in the DJIA (^DJI) in the final 100 minutes.

At the close Friday, the DJIA (+102.43 +1.17% to 8829.04), S&P 500 (^GSPC) (+8.56 +0.96% to 896.24) and NASDAQ Composite (^IXIC) (+3.47 +0.23% to 1535.57) were very strong.

Before the day started, I remarked that equity prices were lifting, yet most traders were far too negative. In fact, the NYSE has just had the strongest four-day rally since 1933. After the half-day close, the five-day performance was the best since 1987.

Closing 3 hours later, the Toronto Composite and Venture Board were both much stronger as the flourish at the close in NY at 1pm and the powerful rally in the final 15 minutes in London (11:30am ET) carried on. At the close, the Toronto Composite (+516.85 +5.90% to 9270.62) and the Venture Board (+18.12 +2.42% to 766.35) were soaring.

On Friday in NY, the leading sector was: Financial (XLF +2.5%), while the only loser was Energy (XLE -1.6%).

Among the industries, Banks ($BKX +3.2%) and Broker-Dealers ($XBD +2.7%) were the leaders, while NatGas ($XNG -2.6%) and REITs ($DJR -2.1%) were losers. The REITs loss was an anomaly.

Goldminers ($XAU +0.84%) closed at 101.59 in NY but the Toronto stocks were much stronger with the 4pm ET close. In fact, Goldcorp (GG) closed up +0.67% in NY, but up +4.17% (for G.TO) in Toronto three hours later.

In the Cara 100, the winners included TCK +24.7% and SLW +16.6%, after I had opined that both would do well on their own merits - if only the Bay Street Bandits would leave them alone.

Sorry, that was Thursday. Haha. On Friday the top two winners for the Cara 100 were (drum roll)… TCK (+16.0% to US$4.92) and SLW (+14.2% to US$3.45). TCK.B.TO closed at C$6.00 (-0.83%) and SLW.TO (+9.1% to C$4.32). The discrepancies account for the fact the Toronto market was open and very strong on US Thanksgiving Thursday. Nevertheless, traders of widely-followed, dually-listed Canadian stocks ought to be conscious of the forex and open trading hours factors.

The Cara 100 losers on Friday were: BC -9.7%, VCP -8.7%, CHA -6.0%, PBR -5.3% and RIMM -5.0%. Volume in NY was almost non-existent.

The US long bond ($USB) gained a further +0.40% to 128.56 as yields dropped across the board. The US T-Bill yield plunged again to 0.02% annually, which means that traders would rather seek a safe haven than high yield. The corporate bonds are being killed, and the credit market spreads between corporate and treasuries are at record levels.

Until this credit market issue is resolved, the Trade of the Generation I called two weeks ago will not REALLY take off. There is still too much repatriation of USD, which happens when foreign securities are sold (selling the Foreign currency) and the proceeds are left in $USD. That move keeps the $USD from crashing, but it is on the precipice. Forex traders are waiting for the repatriation move to end, which will kill the US Dollar and the US Treasury bond market. Already the other end of the trade, ie, Buy Gold, has paid huge returns. As Bloomberg reported after the close Friday, “Gold futures for February delivery rose $7.70, or 0.9 percent, to $819 an ounce on the Comex division of the New York Mercantile Exchange. This month, the price rose 14 percent, the most since September 1999. In the week, the metal climbed 3.4 percent.”

As I remarked in Friday morning’s report, if the Depository Trust Corp system in the US were functioning properly, banks would trust one another to properly settle their trades and bond prices would likely fall as capital would move faster into equities.

Crude Oil ($WTIC) was flat on Friday, closing at 54.43, down 1 penny.

Earlier in the day Friday, the Asia-Pacific equity markets were higher except for Shanghai (-2.44% to 1871.2). The Japanese Nikkei (+1.66% to 8512.3), Australia (+4.10% to 3672.7), Hong Kong (+2.48% to 13888.2), and India (+0.73% to 9092.7) traded higher.

On Friday morning, at 7:50am ET, I reported “the three main bourses were weak: French CAC was down -1.74%; the German DAX -1.78%; and the UK FTSE -0.64%. There were two selling waves (4:15am ET for 30 minutes, and another from 7:00am ET for 30 minutes). The market there is nervous awaiting the opening of the US market to see if the banks are looking ok.”

I had been concerned that the US T-Bill yield was plunging again, which would not help US equity prices until after the European close. But with the early US close (1:00pm), I noted that traders played the rally that started at 11:20am ET in NY at the same time in London, except that in London (from 11:15am to 11:30am ET or 4:15-4:30pm London time), there was a phenomenal push of +1.5% in the FTSE 100.

At the end of the session in Europe, the French CAC was up +0.38% to 3262.7; the German DAX up +0.09% to 4669.4; and the UK FTSE up +1.46% to 4288.0.

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