Good morning investors,
The seasonal push accelerates with QQQ touching $611 premarket as the Dow surged 687 points Tuesday. Small caps led with Russell 2000 up 2.3%, validating my call for new highs before year-end. Meta climbed to $636 after I flagged it undervalued below $600 Monday - sometimes the best trades are the obvious ones. Kevin Hassett emerging as Fed Chair frontrunner adds another dovish catalyst as we head into tomorrow's Thanksgiving holiday.
Note: Market Pulse will be off for Thanksgiving, returning Friday with regularly scheduled programming.
Opening Bell: Momentum Building
Dow ($DIA ( ▲ 1.36% )) futures up 39 points with S&P ($SPY ( ▲ 0.23% )) and Nasdaq ($QQQ ( ▼ 0.32% )) futures gaining 0.2% and 0.3% respectively. Alphabet ($GOOGL ( ▼ 2.43% )) continues its surge, up another 1% premarket after yesterday's gains to record highs. The Google TPU validation story has legs as Meta's ($META ( ▲ 0.4% )) potential billions in chip spending confirms competitive dynamics rather than bubble deflation.
Mortgage applications rose 8% weekly with purchase activity up 20% year-over-year despite rates at 6.40%. Government-backed loans hit their strongest week since 2023. Housing wants to work, it just needs the Fed and the bond market to cooperate.
Small Caps Stealing the Show
Tuesday's 2.3% Russell surge confirms the rotation I've been calling. Small caps hit all-time highs last month after three years of consolidation. Now they're bouncing back after last weeks sell off due to rate cut expectations, but now they are bouncing back hard for the same reason.
The Russell's relative AI underexposure becomes a feature, not bug, in this environment. Greater exposure to financials and healthcare provides defensive growth as the market broadens. My bold call for Russell new highs before year-end gains credibility daily.
Nvidia's Defensive Posturing
Nvidia sent analysts a memo claiming it "does not resemble historical accounting frauds" - unprompted defensiveness rarely inspires confidence. Then it took to X declaring chips "a generation ahead" after Meta's Google TPU news. The lady doth protest too much.
Jensen Huang built an incredible company delivering real products to real customers generating real profits. But when you start defending against fraud comparisons nobody was making, something's shifted. The stock down 2.5% Tuesday despite broader rally suggests exhaustion setting in.
I don't fear for Nvidia at this time but their handling of the press yesterday was a little worrisome and the fact they felt they had to address the allegations was a little bizarre.
Hassett's Dovish Signal
Kevin Hassett emerging as Fed Chair frontrunner changes everything for rate-sensitive sectors. Trump would get a close ally who supports aggressive easing at the independent central bank he's long wanted to control. Markets know Hassett would bring the President's rate-cutting approach to monetary policy.
This explains Tuesday's small-cap surge and could catalyze my Russell, homebuilder, and biotech calls. The market's recent trading shows dependence on rate cuts for the next leg higher. Hassett would deliver them enthusiastically.
Coinbase: The Contrarian Call
Bitcoin holding $85K support creates opportunity in oversold Coinbase. I predicted Bitcoin back to $100K by year-end, and Coinbase ($COIN ( ▼ 2.21% )) would be the primary beneficiary. The stock could reach $280-300 if crypto recovers as derivative unwinding completes.
The setup mirrors late 2023, maximum pessimism in crypto while institutional infrastructure strengthens. Coinbase's monopoly position in U.S. crypto trading becomes more valuable as regulation clarifies. Patient capital gets rewarded here.
Holiday Trading Dynamics
Remember Tesla's face-ripping rally this day last year, holiday weeks create unique dynamics. Lower liquidity amplifies moves in both directions. Institutional selling pressure eases while retail enthusiasm often emerges. Today's strength could extend further than normal trading would suggest.
The Wednesday before Thanksgiving historically sees positive bias as portfolio managers position for year-end. With tomorrow's closure and Friday's half-day, today represents the last full session for adjustments. Expect volatility but with upward bias.
Final Thought
Three consecutive up days confirm the bottom I called last week. Inverse ETF volume hitting two-year highs marked capitulation. Now we're seeing the constructive seasonal push into Thanksgiving I expected. Small caps leading, Meta recovering, and Hassett's potential Fed appointment all support year-end strength.
My four bold calls gain momentum daily. Bitcoin stabilizing sets up recovery to $100K. Russell's breakout accelerates toward new highs. December cut odds at 85% validate Fed easing. S&P 6,800 becomes base case with 7,000 possible if data cooperates.
The market wants to go higher, it just needed excuses. November's correction provided reset, Fed pivot provides catalyst, and seasonality provides tailwind. The setup into 2026 strengthens daily.
Enjoy your Thanksgiving holiday. We'll return Friday with fresh perspective on year-end positioning.
As always, feel free to reach out with questions about navigating these markets.
Best regards,
Dan Sheehan
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.