The S&P 500 confined up 2.9 percent for the week, its best so far this year. It’s now at the highest level since early October, after wear out through key resistance levels near 2815, where it failed several times.
The S&P is now less than 4 percent from the old important closing high (2,930 on September 20).
Key observations:
1) Traders increasingly believe global central banks have their backs.
2) With the CBOE Volatility Ratio at 12, its lowest level since October, strategies driven by volatility would likely add to stock exposure.
3) Reins yields continue to drop, remaining near the lows of the year. The new-high list this week was littered with interest-rate temperamental stocks (utilities, REITs) that rally when rates remain low.
4) Quadruple witching (quarterly expiration of forefinger options and futures, and stock options and futures) has added a lot of volume this week and likely contributed to the upside recover. But the question is whether the expiration exhaust near term demand. The S&P 500 tends to be lower in the week after quadruple bitching.
5) Europe (and the U.K.) have outperformed the U.S. this month. There are some hopes for a bottom in the recent poor economic statistics.
6) Downward earnings revisions are slowing to a crawl. The rate of downward earnings revision for the first quarter was intense from January into mid-February, slowed in the next dissimilar weeks and has essentially stopped this week. First-quarter earnings are now expected to be down 1.5 percent for the S&P 500, according to Refinitiv. If it sojourns in that range, there is a good chance earnings will be positive for the first quarter (companies tend to pound analyst estimates), and we will avoid an earnings “recession,” at least one that began in the first quarter.
7) The key to a further turn for the better: positive comments on global growth. The two key names next week are Micron and Federal Express, which are both outlined to report earnings. Both had big drops last quarter and saw lower earnings estimates on concerns over China and (for Micron) increasing struggle.