Mike Santoli’s market notes: Big Tech ripe to lead, Key level on the VIX, bulls' extra push

Published Tue, Dec 1 202012:39 PM EST

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. Just when the bulls needed an extra push, we get new-month inflows and an u nanticipated $900 billion fiscal bump to support the 2021 economic revival that the consensus is already avidly anticipating. S & P 500 finally looks to be moving above the top of recent trading range, averting a "failed breakout" disappointment, for the moment. Even so, the S & P is now less than 1% above the intraday peak from Nov. 9 (Pfizer-vaccine/Biden-called-the-winner day). So this is not yet escape velocity, need to see how much is first-of-month fresh money effect. The immediate tension in the market is between the support of a broad, inclusive November rally, powerfully strong credit markets and hard-to-fight year-end seasonal forces against pervasive overbought conditions, optimistic sentiment extremes and demanding valuations across parts of the market. As noted yesterday, folks are in the process of getting "all in" on the 2021 renaissance trade, but this takes time. And Q4 rallies from already-elevated technical/sentiment conditions can often "go to 11" (early and late 2017, late 2019) and then have a knack for correcting the excesses in first months of a New Year. And when the rallies have been extremely broad as this one has been, the pullbacks whenever they come tend not to be all that damaging or long-lasting. That said, hard to ignore the speculative energy coursing through this market. The equity put/call ratio this morning was under 0.4 – comically low, the long-term average is closer to 0.8. Means small traders headlong feasting on cheap upside bets. Been happening for a while, all part of the melt up-overshoot scenario which could await us. Stimulus momentum has Treasury yields rising, corporate-debt spreads collapsing and the cyclical/reopening trade re-ascendant – with a dose of FAANG strength too. The big Nasdaq names look ripe for a turn in the lead, sideways for three months as a lot of the dicier, dented stocks have flown. Genuinely are ingredients of a hot-running economy next year – housing/stocks at highs (wealth effect), $1.25 trillion in "excess savings" in consumer accounts, another stimulus lifeline for unemployed/small-biz, pent-up demand for travel/leisure. But how much is already priced in? Big question for 2021. The self-reinforcing Wall Street game of getting bullish on stuff already up a lot is also underway. Mizuho today jacks its stock-price target on PayPal to $290 – an implied gain of 35% — based on customer excitement for Bitcoin. Yet PYPL and Square have been huge buyers of bitcoin to facilitate their customers' trading – which has helped boost bitcoin prices and engineer the excitement that Mizuho is basing its price-target boost for PYPL on. Fun while it lasts. So far the specter of heavy pension-fund equity selling and a clamorous induction of Tesla into the S & P (which should cause selling everywhere else to accommodate) is having little apparent effect. But those things still loom. Market breadth today is healthy but not super-strong (70%-ish percent of volume to the upside on NYSE). As noted, credit super-strong (high-yield ETF HYG outperforming Treasury ETF IEF by 0.86 percentage points – that's a lot. VIX hanging out above 20, unable to drop too much in a +1% tape. Many expect if VIX gets below 20 one of the last under-invested investor cohorts – "volatility-control" systematic funds – will ramp their equity exposure (at all-time highs after a 67% eight-month rally, mind you).

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This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics.

Just when the bulls needed an extra push, we get new-month inflows and an unanticipated $900 billion fiscal bump to support the 2021 economic revival that the consensus is already avidly anticipating.
S&P 500 finally looks to be moving above the top of recent trading range, averting a "failed breakout" disappointment, for the moment. Even so, the S&P is now less than 1% above the intraday peak from Nov. 9 (Pfizer-vaccine/Biden-called-the-winner day). So this is not yet escape velocity, need to see how much is first-of-month fresh money effect.