The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Real or fake?
The market rallied hard today and the only question is whether this is the turn or just a big short-covering ahead of the weekend. As usual, we have no answer.
Futures were up somewhat overnight and gained strength throughout the early morning. The rally really began during the regular trading session. The index opened about +45 and took off after an hour. The S&P 500 spent the rest of the day in the +100 point range with a squeeze into the close. Info tech led the market higher and the Mag 7 were at the point. Yields climbed and Fed Funds price 65 bips of cuts for the year, a big reduction from yesterday.
The consumer staples sector performed worst today, which goes hand in hand with the Fed Funds move and the yield curve shift. There were no headlines that drove the tape so we can’t point to a story that gave markets more faith in a stronger economy. Price action is our only clue and the moves show a market that is less worried about weakness today, than yesterday.
Is that a proper conclusion? Did investors simply decide that the drop from mid-February highs was far enough to go bargain hunting? Did the shorts decide to take the money and run ahead of the weekend?
We only have our gut feel to guide us right now. I’m betting bulls want to come out Monday morning with their buy buttons blazing. I don’t know if they can manifest a rally through force of will however. If the news cycle is benign, they’ll have a chance but even then, they’ll be in for a technical fight as they approach the 200-day moving average (5740) from below.
Maybe yesterday’s despair was a bit too much and today was the proper correction but let’s not forget the state of the world. Healthy growth going forward is an optimistic scenario, not the base case. Where’s the market supposed to be to reflect that base case?
Headline risk over the weekend could change everything so take the above with a grain of salt.
See you Monday, have a great weekend.
-Mike
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