Following a positive response to earnings from Google (GOOGL) , the S&P 500 is set to gap-up at the open for a record six days in a row. There aren't any major developments as far as Covid-19 but the data continue to slowly improve and various states are pushing to reopen their economies.
Optimism that Covid-19 is being slowly defeated is the main driving force for the steady buying but what is bothering bears and skeptics is that there is little evidence that the economic recovery is going to progress as quickly or as easily as the market seems to indicate. There are many economists and pundits predicting that economies will not return to normal any time this year.
Those big-picture arguments don't seem to matter much right now as there strong price momentum in the market. What matters is whether there is some sort of news event that may disrupt the steady buying.
Google's results Tuesday night showed how the "stay at home" theme has benefited the company and the stock is trading higher even though there has been a fall-off in some advertising.
Facebook (FB) and Microsoft (MSFT) report Wednesday night and Apple (AAPL) and Amazon (AMZN) Thursday but so far there seems to be little concern about a "sell the news" reaction to these reports even though there is very little guidance to help determine valuations.
Traders will continue to look for earnings reports to serve as a possible trigger for a change in market trend. However, what will very likely cause some movement Wednesday is the Federal Open Market Committee (FOMC) interest rate decision at 2 p.m. ET.
The Fed has already made substantial policy moves and nothing major is likely to be announced, but what is likely to occur is that Jerome Powell will reiterate the Fed is prepared to do whatever it takes to support the U.S. economy. The consistency of this message is what is helping to keep strong technical support under the indices.
There has been a very easy explanation for why this market is doing what it is doing and that explanation is nearly $10 trillion in stimulus. Why should stocks struggle to price in months of economic uncertainty when there is a flood of liquidity out there to hold them up?
While the lack of interest in fundamentals and technicals offends many market players that like logic beyond just the Fed, there simply is no choice but to respect the price action until it shifts.
We'll see how the market responds to Powell Wednesday afternoon and then the four major earnings reports from leading stocks. There are convenient catalysts for dealing with a market that is becoming extended but we are already setting records for persistence to the upside and it could easily continue.
(Alphabet, Facebook, Microsoft, Apple and Amazon are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
