Thursday 23 January

Good Morning,

A new all time was reached yesterday (by half a point) yesterday as the S&P briefly tagged 6100. The recent rally in breadth took a pause as the AI stocks held centre stage on the SoftBank/Oracle/OpenAI $500bn investment news. I have my doubts on this however, SoftBank has $38bn in cash and $142bn of debt meanwhile Oracle has $11bn in cash and $88bn of debt while OpenAI is burning cash, so I cannot see where the money would come from - the jury is most definitely out on this one.

The latest AAII Sentiment Survey is out and shows a huge increase in bullish sentiment, in just one week bullish sentiment has jumped 18 points while bearish sentiment has fallen 11 points. A bullish sentiment indicator near 50 often presages a pullback.

Overnight the S&P is down 15 points and 28 points off yesterdays high, my thinking here is that we may see 6000 or possibly the breakout level at 5960 tested before resuming higher to the 6150/6200 area. Any close below 5960 is risk off until then we remain risk on. For H1 the largest drawdown I see happening is -10%, high yield credit spreads are narrowing further and are showing no stress in the credit markets for now.

Summary: