How to Survive During Market Calm

SP500

Key zone: 6,800 - 6,850

Buy: 6,850 (on strong positive fundamentals); target 6,950-7,000; StopLoss 6,800

Sell: 6,750(after a confident breakout of the 6,800 level); target 6,600; StopLoss 6,800

The US stock market rose slightly yesterday (an average of +0.4%) on shares of GOOGL, TSLA, and semiconductors (except NVDA).

The rising cost of equity financing always restrains speculators – last year, a similar sharp spike triggered a 3.7% drop in the S&P 500 over three weeks. This year, the situation is similar: high repo rates and record-long positions in equities (futures and leveraged ETFs) are creating potential pressure on the market.

• S&P 500 +0.3%
• Nasdaq 100 +0.5%
• DJ 30 +0.2%

Long-term US government bonds fell 1% yesterday after the US Treasury announced a new large-scale borrowing plan. A sharp correction followed as the forward P/E ratio of the S&P 500 exceeded 23 (a 25-year high). This has intensified concerns that the market is overheated due to the AI-stock rally.

Meanwhile, the ongoing legal dispute over Trump’s tariffs is unsettling investors.

Interestingly, the percentage of stock indexes that have reached all-time highs is now the highest in 26 years, closely resembling the situation in 1999 before the dot-com bubble burst.

Today, Tesla shareholders are expected to vote on Musk’s $1 trillion compensation package. The stock rose 4% yesterday and trades near a local high. Investors remain optimistic — the “bonus” for Musk will likely be approved, and talk of his departure from the company is merely market “noise.”

A few thoughts on the impact of the government shutdown on the market — more precisely, on the looming interbank liquidity crisis.

It was previously noted that on October 31, the Fed conducted a record daily injection into the banking system. Record repo volumes between banks and the Fed continue to be reported.

For now, there is no explanation for this other than the US government shutdown.

Because of the shutdown, many standard processes in government agencies have been disrupted, and the US Treasury has had to rely primarily on issuing short-term debt instruments to keep government operations funded.

The Bessent department has begun “sucking out” short-term liquidity from the system, causing the interbank SOFR (Secured Overnight Financing Rate) to jump 0.18% on November 3.

Some experts believe the Fed has switched to “fine-tuning” — essentially turning the money printer back on during such difficult moments to smooth liquidity issues.

For now, this situation is seen as temporary, and everything should normalize after the shutdown ends. Liquidity will then return to the market, and growth will resume.

Let’s wait.

So we act wisely and avoid unnecessary risks.

Profits to y’all!