The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Slow build.
Overnights have been quiet of late and bulls have made only small pushes in futures in the early premarket and this morning was typical. Futures implied 15 points of upside in the runup to trading and the index opened +10. Morning data moved no needles while overseas markets were up small and had little influence. The S&P bobbed and weaved until 10:30 AM, when it caught a persistent bid and was +40 by lunch. Bond yields and FOMC expectations are only slightly changed so there’s been no meaningful shift in the bigger financial landscape.
We’re witnessing a coalescing of equity market opinion. The market isn’t falling so investors choose to interpret this as proof of strength. They are hopping on stocks again. Each uptick pulls in more longs and the trend self-sustains, albeit slowly. It’s a turtle-esque momentum trade, which I find unusual.
There was a time in the last couple of years when intraday momentum was a powerful force. The momentum traders tended to go long but sometimes not. The speed and stability of an intraday trend was obvious though.
Lately, it’s as if the quick and decisive momentum traders are all missing. They’ve been replaced with the slow and questioning momentum followers. The rallies look like they’re drawing people in all along the way, and when a rally fizzles, investors maintain the higher level for the session, instead of shooting for a reversal.
Back when momentum fell more *algorithmic,* the trend was established quickly with volume and when it broke, the push the other way was sharp and vigorous.
It’s my perception that intraday flows felt technicals-driven and algorithmically implemented. Now it seems like the flows are already established as long-biased and the implementation is confidence-driven. As the tape climbs, the flows grow. I wish I could interpret what it meant, if it were true.
Setting that puzzle aside, we are seeing a resumption of the long-term bullish trend. The S&P is recovering from the recent dips. The local bottom was 6212 and the all-time high was 6427. We are a little beyond the halfway point of recovery. Any chart-watchers are going to pile in further as they come to believe the bottom is in. Today’s rally strongly reinforces the notion that Friday’s low is in the rearview mirror and that the next direction for the market will be towards the prior highs.
We haven’t seen a resumption of the fear of missing out so upside hasn’t been exciting, yet. That could easily change. I suspect that things can, and will, get speculative *after* we make new highs. The narrative is set in stone. It’s going to take a world-shifting event to change the perception.
Is that likely in the near-term?
See you tomorrow.
-Mike
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