Weekly Update: The “Harris Trade” is Forming
Good evening, and welcome to this week’s edition of Stealth Trades!
After an ugly 4 days last week, stocks ripped higher to close the week out strong.
Wednesday was especially significant.
The CPI report showed no drop in inflation – leading to an initial selloff in the market.
But just before lunch, the big boys started buying. What followed was an epic reversal all the way to the close.
The five-minute chart of the S&P 500 above shows the action in detail.
One of the things I look for is anomalous days in the market when stocks rally on bad or mediocre news as this is a strong sign that prices are likely to go higher. Wednesday was just such a day.
We saw similar price action in May…
And again in August…
If history repeats itself, this is what we could see leading up to the election:
A lot of investors are focused on the upcoming election. Odds of a Trump victory, which appeared to a foregone conclusion following the assassination attempt, are now around 50/50.
In this week’s presidential debate, Trump was less impressive than in years past and Harris was more prepared than most expected.
Regardless of your personal views on the event, the stock market gave the win to Harris. Stocks that would have benefited from a second Trump term like Trump Media (DJT) and Geo Group (GEO) – a private prison company, fell the next morning.
Solar stocks like ARRY and FSLR, on the other hand, which would likely benefit from a Harris victory, saw big gains.
The price action of these names following the debate is laid out below.
The “Harris trade” that is beginning to form is in the clean energy space.
Solar stocks have been eviscerated over the last few years, so this is a sector we will continue to monitor for a potential reversal.
Gold and real estate – two of the areas I have been highlighting for several months – continue to show strength and will likely play out regardless of who wins in November.
Below you can see the decade-long base in gold.
We are seeing a similar pattern on the daily chart:
This “base on base” action is extremely bullish, and I believe gold will reach $4,000-$5,000 per ounce over the next few years.
Mortgage rates are also coming down thanks to expectations of aggressive rate cuts in the coming months.
This is likely to fuel a housing boom as 3% mortgage holders may finally come out and play.
If all plays out as expected, we should see 5% mortgage rates by the end of 2025.
As of Friday morning, at the time of this writing, the S&P 500 is less than 1% from making new all-time highs. It is up 17.9% year-to-date.
Until I see evidence to the contrary, I remain bullish.
Best wishes for your trading,
