SPXE

This is a weekly series focused on analyzing the previous week’s economic data releases.The objective is to concentrate on leading indicators of economic activity to determine whether the economy is strengthening or weakening, and the rate of inflation is increasing or decreasing.This week I will examine construction spending, the ISM manufacturing and services indices, weekly unemployment claims and the jobs report for October.

The SPY and IWM took in cash last week; money left the treasury market.Pfizer announced very successful vaccine results.The markets rallied on the Pfizer news.

The big news this morning isn't about the election.It's about a light at the end of the virus tunnel.And stocks are breathing a massive sigh of relief.

As a result of eager investor anticipation of a new U.S. political configuration, the shares of risk assets have generally climbed during the past several trading days.The primary difference between the February-March 2020 correction and the current one is that this one is developing much more slowly.I am currently sporting my heaviest net short percentage since August 2008, even more than at the beginning of September 2020.

The options market is moving the stock market.Known unknowns will not hurt the market substantially.We are in an era where it is only market events that are not hedged that hurt the market and the worst events will be liquidity events.

The short-term market direction is higher.I also think that the amount of upside is limited by stretched valuations, a worsening pandemic, a contested election, an ongoing recession, and a lack of needed stimulus.I don't see a return to the March low point.

I wrote previously that risk sentiment was very likely to improve dramatically after the election.Biden is not as "market-unfriendly" as many make him out to be. The rally in equities when he was leading Trump was clear to see.Now that weekend reports have largely confirmed his presidency, market focus will return to liquidity.Global central banks are expanding their balance sheet size at rapid pace, and we should expect a stimulus package from the European Central Bank by year-end.Risk here is for Trump to refuse to cede power, which will delay the passing of any stimulus bill in Congress.

The S&P 500 earnings data (compliments of IBES data by Refinitiv) continues to show positive revisions to forward estimates, which is most unusual in my 10 years of updating this earnings data each weekend.Note the continued improvement in estimated S&P 500 revenue and EPS growth rates over the next 4 quarters. That's important.S&P 500 earnings and revenue data have been a consistently positive story.