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“Nothing a couple of aspirin can’t cure.” – Peggy Olson, Mad Men
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The headlines say that the market’s fate all comes down to the next 13 trading days, but this ‘important’ period for the market is starting off slowly. Equity futures are oscillating around the unchanged line even as Treasury yields and commodities have pulled back. Crude oil down over 1% while natural gas plunges more than 12% on little news. Just to illustrate how quiet things are this morning, bitcoin is down less than 5 dollars – not percent – but dollars!
It may be quiet this morning, but the market has been giving headaches to both bears and bulls in the last several weeks. A quick look at a chart of the S&P 500 illustrates the frustration being felt on both sides. On a side note, it was ironic to see this morning that Bayer filed its patent for the ultimate headache cure (or at least one of them), aspirin, on this day in 1899.
In late January/early February, the S&P 500 broke above its December highs and its 200-day moving average forming what looked like the first real higher high since the peak in early January. At that point, the S&P 500 was further above its 200-DMA than at any point since it first broke below that level early last year. Then, the January employment report was released.
January’s much stronger-than-expected employment report coupled with a strong Retail Sales report and higher-than-expected inflation data, shifted the narrative quickly back to one where things were overheating and inflation was going to turn higher. The market quickly reacted with a radical shift in market pricing for Fed policy as Treasury yields surged. Stocks immediately reversed much of the gains from January, and the Dow actually ticked into the red for the year. The S&P 500’s pullback wasn’t as bad, but late in the month, it was back below its 50-DMA and once again testing its 200-DMA.
An intraday bounce on that first test briefly rekindled some optimism, but by last Thursday morning, the S&P 500 was back below its 200-DMA and both bears and bulls started to prepare for another leg lower. As hope was fading, stocks staged an intraday rebound that continued right into Friday. Now, heading into the new trading week, the S&P 500 is back above its 200-DMA and 3% above Thursday’s lows. Bulls are feeling confident again, but with Jay Powell scheduled to testify tomorrow, the employment report coming out Friday, and then CPI next week, don’t start snorting at the bears just yet, they may just need that aspirin back by next week.
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