A bullish week in a bullish market. It is healthy to sustain a correction in a dramatically overbought QQQ without crashing the whole market. SMIDs are overbought to extreme. Earnings beckon. We need some real data. In the meantime we probably have to endure both momentum and the repetitive binary trade.
The stock market appears to be in a transition from the acute Covid response to a life with Covid where vaccines are impactful and broader economic activity returns. Where, when and how much growth happens this year remains to be determined. Imagination will meet machines in next earnings season.
We seem to be in the early stages of the market’s transition from full Covid impact to continuation Covid with vaccines. There was really no news to report last week of a particularly negative nature. The noise around yields and inflation is worth monitoring. In the meantime, algos will reset as algos do.
I think the main thing to worry about is whether or not we should be worried. As previously noted either continuation of prior trends or even 5% pullbacks are reasonable ways for the stocks to recalibrate without changing the bullish trends. It’s worry season. And spring is coming soon.
This week saw an echo continuation of the prior week’s extremely strong bullish move. There were no specific changes in trends except perhaps the VIX which if its trend confirms should continue to move lower and stock prices higher. Most signs point to continued bullishness. Until they don’t.
Big tech earnings, fiscal stimulus, vaccines conspired to rally stocks. Tech and SMIDs drove the gains. Stocks + Treasuries + US dollar + commodities + technical analysis all signal an economic growth scenario and a bullish stock market. Stay tuned to see if it works that way.
The US equities are trying to deal with so much liquidity and an extreme bullish sentiment that we are just sloshing and whooshing. Good for traders. I doubt a change is far in the future. Earnings and outlooks will eventually ground the market to some degree.
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