The action has become downright frothy over the past couple weeks with the S&P 500 gapping higher six straight days in a row. Good responses to earnings, positive news from Gilead Sciences (GILD) about its Covid-19 treatment, and optimism about opening the economy have been driving forces but primarily the bulls have been energized by the massive fiscal and monetary stimulus.
The debate over how the flood of liquidity created by the Fed has undermined fundamentals, technicals, and everything else is growing louder every day. Market participants like to believe that there are reasons for buying and selling stocks other than Federal Reserve manipulation.
For more than a decade the single best piece of financial advice has been 'don't fight the Fed'. Nothing has worked better than that but the impact of the Fed is now being felt more than ever. Many market players are willing to believe that the financial fallout of the coronavirus can be completely offset because of the actions that are being taken.
While the power of the Fed is unquestionable, there will be issues that liquidity simply can't fix. Many consumers and businesses are likely to shift their buying in the months ahead as they deal with the fallout of this pandemic. There will be winners and losers as behavior changes and that is something that the Fed will not be able to control.
There is an extremely intense debate right now between those folks that don't think that the market is accurately discounting all the financial issues that lie ahead and those folks that believe that the Fed is all that matters. Many market professional have spent their lives navigating the markets and stocks based on a variety of considerations and that are loathe to embrace the idea that none of that matters anymore because of the Fed.
The Fed has always been a primary market drive but its influence now is magnitudes higher and has lead to the craziness of the S&P 500 gapping higher six days in a row while market players are contemplating the worst medical and financial crisis they have ever seen. Reconciling this action is difficult for many of those that have always relied on charts and financial statements.
Many folks have given up on the idea of any sort of meaningful pullback in the market due to the Fed. If that is the case then finding attractive charts will be very challenging but right now technicals have been rendered largely irrelevant.