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“To bring about change, you must not be afraid to take the first step. We will fail when we fail to try.” – Rosa Parks
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It was looking like a little bit of a hangover this morning as futures were modestly lower, but as yields have continued to plunge and the dollar declines, futures have been drifting higher. It’s a busy day for economic data with Jobless Claims, PCE, Personal Income, and Personal Spending all on the docket at 8:30 and then ISM Manufacturing at 10 AM. Outside of the US, China’s PMI was below 50 but stronger than expected. There’s also been some additional optimism for growth prospects on reports that the country will further relax COVID restrictions. Commodities are rallying in reaction to the news, and WTI is firmly above $81 per barrel after trading in the low $70s earlier this week.
The 8:30 data was just released and initial claims came in lower than expected while continuing claims surged above 1.6 million. Inflation data was roughly in line to slightly better than expected. Personal Income was well above expectations (0.7% vs 0.4%) while Personal Spending came right in line with estimates (0.8%). In response to the data, futures have been ticking higher.
After August’s miserable failed attempt to break above the 200-day moving average and the double-digit percentage loss that followed, bulls had been attempting to take out that level again in the last couple of weeks. Just when it looked as though the latest attempt was running out of steam, yesterday’s Fed-fueled rally finally got the job done. Whether or not it holds will be the real test.
Before bulls could even start to celebrate the breakout of the 200-DMA, another resistance level looms above. From the high in early January, you can draw a perfectly straight line connecting the dots of the subsequent lower highs we have seen this year, and yesterday’s close is the fourth point in that line.
Yesterday’s 3.1% rally was the second-best day of the year for the S&P 500 in terms of performance and the seventh-best breadth reading. At +461 it was still a strong reading but were it not for underperformance in the Energy sector, which accounted for about a third of the 24 stocks in the index that traded lower on the day, breadth would have been even stronger. Yesterday’s +461 reading was also the second all-or-nothing day of the week. That brings the year’s total to 45 and puts 2022 on pace for 49 all-or-nothing days. Already 2022 ranks fourth in terms of the most all-or-nothing days for a calendar year since 1990, but anything above 48 would rank at least third behind 2008 (52) and 2011 (70). In terms of volatility, 2022 ranks right up there with the best of them.
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