Rubber Meets the Road

Earnings season officially kicks off today, and markets remain poised to go higher. Now to find out if the markets guessed right on the data.

Most of the technical signals are shifting higher. All three major indexes have BigFoot algo buys. The database is back over 78% long. The Market Macro is positive, and both credit and economic macros continue to improve.

These positive signals will be an interesting dichotomy to the barrage of data surrounding coronavirus. Concerns over shutdown 2.0 remain, but the theme seems to be determined: companies that get to stay open, and companies that are location-agnostic (and to a certain extend, the companies that support them) have been the big winners.

The political environment is still toxic – nothing new there.

So we’ll see how earnings shape up. It’s early, and expectations have been set really low (like 44% declines expected low). So we’ll see how it shakes out.

If the stock market has it right, it priced in the damage early and quickly, and it’s now just re-pricing as the economy evolves. If the they got it wrong, things could get dicey.

For now, all indicators are the the 3275-ish level (the high-water-mark for the 50-day moving average for 2020) is the next resistance level to get challenged. A few solid earnings surprises and this could easily happen as it’s less than 3% from last Friday’s close.

For the week, look for an SPX resistance first at 3231, and next at 3275. Should markets reverse, support is 3111. If this is breached, a more significant down-trend could be signaled. Currently the probability of this occurring looks pretty low.

The BigFoot algo’s are reflecting a lot of positive momentum building in this market. The Macro’s are still showing caution, but they are also improving. The real issue continues to be Fed intervention in these markets. The “Fed Put” still seems to be a thing these days. And as much as things are a structural mess behind the scenes for real people, the markets seem more focused on the fact there are few better places for money to go.

So don’t find the Fed… still… for now… And we’ll keep watching the data to see if or when that changes.


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