The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
What to do?
Equity investors couldn’t decide whether to extend yesterday's gains or whether to take them back. We ended up going back and forth, to small degrees. US Treasury yields did extend yesterday’s moves and yields fell across the curve, 2-4 bips. A substantial number of macroeconomic data released this morning but futures didn’t react much. The data shows a healthy economy and investors are OK with that reality now… or at least they are OK with it over the short-term. Overseas markets rallied strongly overnight in response to what our market did yesterday.
All in all, today was quiet and non-eventful. Attitudes were dramatically shifted yesterday and the question was how investors would react T+1. It turns out investors just shrugged their shoulders. Markets didn’t view yesterday as the *beginning* of a multi-session rally in both sentiment and price. Market’s viewed it as a one-off shift. I don’t think that’s realistic but the market outvotes me always and for today, the market says that yesterday was an isolated incident.
Maybe we need to see a bunch more earnings results for the rally to continue? My perception is that the dam in sentiment broke yesterday and it’s only a matter of time before everyone gets bulled up on stocks and everyone is chasing offers higher.
Today’s hesitation may be rooted more in digesting yesterday’s huge move instead of thinking about the attitude shift that is in-motion right now. We’ll see. I understand the innate desire to resist buying after a 1.8% climb in the S&P 500. I think that there’s much more upside coming though and you have to front-run it regardless.
Technically, the S&P isn’t overbought nor oversold. The true technicians out there *should* be buying without fear. The rest of the market seems to want to cling to the worries of a week ago. It will take time, and maybe a few headlines, for them to get over it.
See you tomorrow.
-Mike
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