The markets rallied strongly yesterday after one of the worst stock market Mondays I had ever seen.

A lot of attention has been on the things that fell the most on Monday.

That means the Bitcoin dump and big drops in stocks like NVDA, and other so called “AI” plays.

However, not much has been said about the stocks and sectors now showing strength.

If you look at the above chart of tobacco giant Altria (MO) you would never know that the stock market Monday dump even happened.

The other tobacco stocks have the same chart.

They are defensive plays, because they pay high dividends and have stable earnings.

Recessions don’t stop smokers from smoking.

At this point what would you rather do when there is talk that the Federal Reserve must slash rates like crazy to stop a recession?

Buy MO and get a 7.92% dividend or throw your money into a virtual coin like Ether, that represents ownership in nothing in the real world, or an “AI” company that makes no profit?

Safety and stable earnings are what people do in times of uncertainty.

The same story is happening with REIT stocks, as you can see from the sector RWR ETF.

REIT’s historically do well when the Federal Reserve lowers interest rates, because they pay dividends, that usually are stable.

People have to keep paying rent no matter what happens with Bitcoin price movements or the economy.

The same goes for electricity, and utility stocks, which are keeping their strength in this market, as you can see from DUK.

While a lot of stuff fell hard, and crypto coins crashed, there are things that remained strong on Monday.

Hopefully the stock market can rally more.

I think it will, but it may have more wild swings first and it could end up retesting Monday’s low before going higher at the end of the month.

It’s how things stand after the November election that will truly matter for next year.

No “AI” was used to write this email or edit it.

And…..

It’s still worth keeping an eye on the VIX.

This is the VIX on an hourly chart.

Monday brought the biggest gap up and then fall from an intraday peak for the VIX ever.

On Tuesday it fell below 30.

It’s likely to go up and down now between 22 and 32 for a few days, maybe a week or more, before it can fall below 20.

That means some intraday volatile swings are likely to continue in the markets for the short-term.

I don’t want to say the bulls are in charge of the markets yet, but the bears may have gotten enough of their full and gone back into their caves for now.

Most of the leverage players and mispositioned gamblers should already be flushed out from Monday’s drop.

-Mike

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