The Market is Not the Economy… For Now

The S&P500 seems to have a mind of its own these days. In spite of terrible economic numbers, we remain down only about 16% or so from all-time highs. (And judging from the futures markets, that number will improve even further Monday).

We’re at a technically interesting point. Interesting because this market is bumping up against the resistance area of the 50-day moving average as well as the 50% and 61.8% Fibonacci retracement levels (depending on where you actually draw the starting point for this measure).

If this is anything like what we saw in the 4th quarter of 2018, this market is going to gather here, then leg down to new all-time lows.

Then again, unlike 2018, this time we have a massive stimulus and QE program underway… of course, we also have massive unemployment and a bunch of confusion as to where things are headed from here.

As I’ve said before, trying to out-guess this market is folly. This virus is as much about politics as it is about data these days. But we do have some non-virus data that still matters.

At this point, the BigFoot macros are a mess. Not only are the credit and market macros negative, the but the economic macro broke too… Yes, I say ‘broke’ because the data got so extreme that the signals just sort of freaked out. (We’re working on it. And a solve will definitely be had. But for now, the data got so extreme we just sort of snapped the speedometer.)

The algo’s are a bit more orderly. The show about the same as last week, hovering around 20-21% long overall.

So the question is, what now? With the stock market already pretty high, it’s tough to imagine this thing going much higher. Then again, we are almost literally throwing money from helicopters now. That money has to go somewhere, right?

Already there are anecdotal reports that grocery bills are higher. Is the supply/demand curve shifting towards inflation? Well… if supply is restrained and demand isn’t…

Whatever the case, this thing is messy.

If I had to call it, I’d say we drift sideways for a week or two, then pull-back towards the 2650 level again on the SPX. What happens next? To borrow a term from the Fed… I’ll remain ‘data dependent.’

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