To Infinity, and Beyond!

The economy no longer matters. As long as we have money from helicopters, the stock market can go higher… and higher… and higher… And if you’re one of the chosen ‘essential’ businesses, your stock can go to ALL TIME HIGHS!

The reality is, things don’t make a ton of sense right now. Economically, we’re fractured. Unemployment is setting records, yet the indexes climb. Companies withdraw guidance, yet the indexes climb. Governments talk about extending or re-instituting shut-downs, yet the indexes climb.

You get the theme here? The indexes want to climb. This is momentum playing out in front of us.

In truth, Indexes are a bit of a conundrum for the markets right now. The entire market is not so healthy, but indexes would lead you to believe this is not the case. Underneath the eclipse of just a few mega-stocks, a market actually exists; a market with winners AND losers.

The larger question is, will the indexes ever re-sync with the economy? In short, maybe not. Since the indexes – particularly the S&P 500 – have become so top-heavy, there may be a decrease in correlation to economic activity… at least for a season.

Here’s the issue though – if a handful of stocks drive the indexes up, that same handful can drive them back down. And, at some point, valuation will matter again. Perhaps it is not until we get some semblance of economic stability again – perhaps, for now, money flows into the mega-caps because it feels safe. But, when things begin to function again, will the stratospheric valuations be justifiable?

We’ll see. But for now, the them is simple: earnings don’t matter (yet), and the Fed is printing money. So don’t fight it…

For the week, the trend is actually sideways. Futures point to a sharply higher open this Thursday. However, it’s a shortened trading week, so volatility tends to be higher.

We’re over-bought by all the measures we typically use in this blog. This market is trading on hope and momentum. We’ll see how far it carries us.

For the week, here are the key numbers:

S&P 500 support levels: 2943 / 2907 / 2887

S&P 500 resistance levels: 2999 / / 3027 / 3060

IMPORTANT DISCLOSURE INFORMATION

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