The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Bounce
Headlines lacked potency and for US investors, that was a good-enough reason to buy yesterday’s dip. Futures traded flat overnight and in the premarket but the buying began at the opening bell. The S&P 500 rallied in the morning and hovered around +45 points for the afternoon. The equity rally was broad and recently unloved names welcomed the bullish attention. Yields on the Treasury curve didn’t do too much but it did flatten some. FOMC cut probabilities are fading quickly. A 25-bip cut on March 18th is now priced with a 1.6% probability.
Dip-buyers and bulls see today as yet another vindication in their very lucrative history of US equity success. There was no news that clearly helped their cause and there have been a lot of dips this year, along with a lot of brief and minor recoveries. While the pattern is familiar, the size and duration of the upside is not. I don’t think this is a meaningful signal but it’s not like the good ‘ole days either. The broader market is in quite a range, essentially here since October.
Both bulls and bears are looking for some catalyst to break the market out of the range. The State of the Union tonight, Nvidia’s earnings tomorrow, the Iranian talks Thursday are some of the contenders. I have no feel for how those events will break. To be honest, the market doesn’t seem to either. There’s no speculative push in advance of these events and the market is treading water during the run-up.
For as jittery as we were, here and there, lately, we’ve calmed down quickly. It doesn’t seem like markets have decided that the all-clear signal has been given. It’s too soon for that given the brew of risks at play.
But it also seems like investors are thinking about *when* the all-clear signal will come and *what* it will look like. It feels like some investors are preparing to pounce.
The headlines will need to cooperate though.
See you tomorrow.
-Mike
Visdom Market Commentary
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