The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Everything’s in motion.
Futures traded down to as much as -40 points in the early hours but they began to recover as we approached the open. Weekly jobless data (229k vs 228k est & 229k prior revised from 228k) gave no hint of US economic hiccups and other economic data, retail sales and PPI, rattled no cages. The S&P opened down about 20 and rallied consistently after about an hour of wandering around the opening prices. The index went positive before lunch and held a respectable gain for the rest of the session. News headlines weren’t compelling and capital flow normalized to 100%. Yields fell across the curve and for the first time this week.
Inertia presently exists and it’s on the side of the bulls. Headlines are uneventful and the scars of April remain the primary influence on current attitudes. The S&P is well off the bottom, the retest wasn’t even close to the April 7th lows, the subsequent rally is nearly without a downtick, and the market has broken above the major moving averages with conviction.
If that’s the narrative, what’s to keep sentiment from improving further? The answer is negative news, which isn’t breaking. As long as policy makers stay quiet, investor optimism will swell. The current cycle, of better feelings pushing prices higher resulting in feeling even better, is about one month old but also unbroken. It also doesn’t appear to be on its last legs. It feels like there is still room to run.
And if that’s how everyone feels, that’s how it’ll play out.
Riding the rally upward to new highs is the consensus play. Just because it’s consensus doesn’t make it wrong. It does make me nervous.
See you tomorrow.
-Mike
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