After the intraday low on April 7th at S&P500 4835, we are starting to see a healthier technical pattern develop, though we may not be out of the woods yet. We rallied back to about 5480 or 13.5% off the bottom. After a second attempt at 5480, we set a higher low at 5158 on a closing basis. Today we are trying to breach the double top resistance again as of this writing. If we stall again and create a short term triple top, that will become a more formidable resistance. Getting through S&P500 5500 to set a new lower high would be better. In either case, if volatility continues, we would look to set a higher low and try to breakout again.
Too some degree, we are at the point where negative news is being ignored a bit, earnings are coming in good as expectations are muted, and we are nearing a time when the focus may shift to tax reform, Fed rate cuts and deregulation. The market has likely priced in tariff concerns for the most part, and expects even that story to get better from here.
Interesting stat: Recently we ended the day with all Nasdaq100 stocks up for the day. That has only happened seven times before and the market was up and average of 25%+ a year later.
The CBOE Volatility index has come down significantly, but is still elevated. Therefore, we still expect larger daily moves than normal, but believe the recovery may have begun. Historically, event driven market drawdowns recover much fast than economic driven drawdowns. The financial sector typically signals economic struggle, and financials were actually a leading sector before the correction began. We continue to expect the economy to be resilient and growth is likely to resume in the second half of the year.