"Nothing in this world can take the place of persistence. Talent will not: nothing is more common than unsuccessful men with talent. Genius will not: unrewarded genius is almost a proverb. Education will not: the world is full of educated derelicts. Persistence and determination alone are omnipotent."
-- Calvin Coolidge
The S&P 500 made its last high a little over seven weeks ago, on March 1. Since then, the market can't make up its mind. The bears have made some inroads and have kept the long running uptrend under pressure, but they have been unable to deliver the knockout punch to push the indices into a downtrend.
Each time the bears come close to seizing the advantage, the bulls go back to work and prevent any real damage from being done. That is what happened on Thursday after a dreary day on Wednesday when the Dow Jones almost took out support due to poor earnings from Goldman Sachs (GS) and IBM (IBM) .
There has been a growing list of potential negatives lately, and this time the market is paying more attention. The bears have been anticipating disaster ever since Donald Trump won the election in November, but the market still refuses to embrace the idea that the stars are aligned for a major disaster.
By any measure, the action on Thursday was quite good. Breadth was excellent, the gains were substantial, the indices closed near the highs and there are plenty of underinvested bulls and overly aggressive bears to do more buying. The issue now is whether the market can build on this strength.
Since March 1, the market has had three other days like yesterday. The first was the reaction to Donald Trump's speech to Congress on March 1. That spike completely reversed that day. On March 15, there was another spike, but that was followed by four successive negative days that pushed and broke the short-term uptrend. On March 28, the market came off the lows of the months and managed a couple of more positive days, but momentum fizzled and that gain was eventually wiped out a couple of weeks later.
Yesterday was the start of the fourth try to regain the momentum that was lost after the big run in February. The early indications are mixed, and with the French election pending this weekend, there is some caution.
If you focus on the macro arguments, it is very hard to be highly bullish. So far, earnings have been lackluster, the political situation has been difficult, economic growth seems to be slowing and bonds have been rallying despite a hawkish-sounding Fed.
The one thing that the bulls have been focused on is some talk from the Trump Administration that tax reform will, hopefully, be accomplished by the end of the year. Details should be forthcoming, and that is giving the market a lifeline and preventing a downtrend from building.
After yesterday, the bulls have the ball and the potential to make a run. If momentum fizzles out once again, it will be an illustration of how the character of the market continues to shift.
Persistence is the missing ingredient in this market, and whichever side can generate it is going to win the battle of the market trend.