09Nov10:23 amEST

A Long Time Loading

The Pfizer vaccine news, leading to a plethora of breathtaking gaps higher in back-to-normal plays like AAL AMC WYNN, among many others, certainly is giving many bulls a Monday morning buzz that last week's ceremonial election hedge-burning may be just starting. On the other side of the tape, the extended work-from-home plays like ZM are unwinding sharply as a knee-jerk reaction to the PFE headlines. 

Whenever the dust settles (and the online brokerage platforms beginning working again in unison), it will be interesting to see if the likes of AMZN ZM ZS get bought again. After all, they have been terrific performers year-to-date and present compelling growth stories that make them hard to doubt. 

However, there is a x-factor which has been a long time loading and is likely very much being overlooked on a busy Monday like today. 

That wildcard would be, of course, the direction and velocity of rates. On the TNX weekly chart, below, which represents rates on the Ten-Year Note, the gap higher in rates this morning takes them back to the high just before the turmoil in markets last March. Recall that The Fed acted more aggressively once they saw rates spiking up very quickly and forcefully. 

If higher rates are starting to materialize, then Wall Street models will begin to take account for this slowly but surely, at least at first. Growth stocks, mostly in the Nasdaq, may not bounce as much as bulls have come to expect, and the dips in value plays like energy, materials, banks, and insurers, may not allow patient buyers to enter at their desired levels. This thesis has been a long time coming and loading, but once it is performed fully I expect an abrupt change of character in markets. After all, consider how potent the Wall Street models were to begin with--They kept buying growth no matter how expensive and selling value no matter how cheap they became. No matter how irrational, the models and trends persisted. Thus, when the models reverse course, the adjustment can be equally violent. 

And it may very well have already started. It's just that has come under the auspices of a silver bullet vaccine. 

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