"Smells Like Victory" - Happy Memorial Weekend...
Let's start with this...
S&P at record highs as US macro data topples to 15-month lows...
Nasdaq hit record highs as Earnings Expectations slump to 2017 lows...
Small Caps remain underwater post-Trump-Dump... Nasdaq is now up 7 days in a row - longest streak since early Feb
NOTE - today was different - no big spike in stocks
Today saw S&P and Dow glued to the flatline...with a very chaotic end
Volume continues to collapse in this levitation off the Trump Dump...
As the cap-weighted S&P continues to dramatically outperform the equal-weighted S&P (i.e. the big tech names are driving)
S&P Equal weight remains below the March highs...Simply put, without FANG stocks, th emarket has gone nowhere in almost 3 months...
As Citi notes, a close today above 2,405 on the S&P 500 suggests we can rally towards 2,500+ in the coming weeks:
- Even within trends, markets do not move in straight lines. Rather, market rallies are interspersed between sideways moving markets. In some cases, the majority of a rally is spent in consolidation with the big moves in the trend happening quickly. Such a dynamic is currently at play in the S&P 500.
- Since the bullish break seen in July 2016, the S&P 500 rallied 14% over 46 weeks through today (this came after over a year of the S&P 500 consistently failing around the 2,100 area). However, most of that time has been spent with the equity market in consolidation/ranges. The actual gains have taken place over just 14 of those 46 weeks in the shape of quick market rallies.
- We may now be on the verge of another such move. In the prior three rallies since July, a weekly close through the top of the prior range has signaled the start of a multi-week rally. Another break like this would be confirmed with a close today above 2,405.
- If this is a bullish break, how high can we go? The average rally after the prior three breaks (from the break level) has been 4.2% and a similar move this time would suggest a move to 2,506 in the coming weeks.
- Beyond that, we continue to view the overall global economic and market backdrop to be positive for Equities and continue to think a move towards 2,750 by year end can be seen
Finally, while AMZN dropped after testing towards $1000 agains today, it closed modestly green again (for the 7th straight day)
Here is a helpful chart in case you were wondering what was driving AMZN's success?
VIX is down 7 straight days and clsoed at the lowest weekly close since 1993...
Short-term VIX crashed a record low...
Treasuries ended the week marginally higher in yield...
But the yield curve (2s10s and 2s30s) have tumbled to cycle lows...
The Dollar index managed to close green on the week after bouncing off the post-Fed drop...
Cable was by far the weakest against the greenback and Yuan the strongest...
Despite dollar ended higher, gold and silver gained on the week...
WTI and RBOB both fell on the week after OPEC disappointed...
Gold and Silver had a great week (with the last now well above pre-fed rate hike lows)
Finally, Bitcoin was hitting the headlines every day this week and ended on a weak note (biggest drop since January) but still up over 10% on the week...