“Davidson” submits:
Market sentiment improves despite a decline in SP500. This is evident in the rise in the SP500 Net Non-Commercial Futures, the rise in $WTI and the rise in the rise of 10yr Treasury minus T-Bill rates. Each has moved significantly from the May-July 2023 lows representing maximum institutional fear of a SP500 downturn. As fear is relieved, these hedges are removed and the general trend for the SP500 has been higher, well-correlated but not lock-step as the SP500 declined last week. Note, adding these hedges follow market declines and removing them follow the market’s rise with several month’s lag, In recent activity the SP500 low was October 2022 and the maximum hedging activity occurred ~8mos later May-July.
There remains a fascination with “The Magnificent 7”, a media term identifying the top 7 issues dominating the behavior of the SP500. The removal of hedges generally indicates that capital is shifting to equities. The dominance of a select few issues on index pricing effectively eliminates any discussion or impact on markets till they actually catch enough investor attention to generate a buzz. Business trends are often ignored till the buzz is loud enough to sell media advertising. In bits and pieces, capital is shifting towards equities other than “The Magnificent 7”.
The long-term charts of Exxon Mobil(XOM) and BP(BP) share prices, two large market capitalization oil majors, have received little attention by the media as they reach lifetime highs. XOM remains a portfolio suggestion among other energy related issues.
