On April 1, the S&P 500 broke to the highs of the year following positive economic news from China. There has been some good follow through and the market has held up very well, but there has been quite a bit of churning on lower volume as market players wait for the next catalyst.
Here on Friday morning the S&P 500 is set for fresh highs following more positive economic news from China, a big planned takeover of Anadarko Petroleum Corp. (APC) by Chevron Corp. (CVX) and a strong earnings report from JPMorgan Chase & Co. (JPM) .
The JPM report is well ahead of estimates and the stock is gapping up over its 200-day simple moving average and to new highs for 2019. That bodes well for earnings season, but we'll see how the stock trades as the report is digested. Financials struggled for a while on worries about an inverted yield curve, but that seems to be quickly forgotten.
The market right now has an extremely positive combination of strong economic news and accommodative central banks. With inflation still low there just isn't any pressure to raise rates, which causes great frustration for bears who have long anticipated that more hawkish central banks finally would put an end to this long-running uptrend. Lately the bearish narrative has shifted to the view that slowing economic growth would be the problem, but there just isn't enough concern about that right now for the market to embrace the pessimism.
My view recently has been that we simply must stay with the trend until there is some evidence that it is shifting. The strong action here on Friday morning is why that reactive approach is better than constantly trying to anticipate a market turn. It is easy to formulate an argument about why the trend should reverse, but trying to time it with any precision is impossible.
The action here on Friday morning is going to create a high level of anxiety for both bears and underinvested bulls. The fear of missing out will gain traction and the dip buyers are going to be more willing to jump in on minor weakness.
This is a classic uptrend right now and it is been driven by a Goldilocks environment of good economic news and friendly central banks. Fight the trend at your peril.