October 18, 2021
Good morning,
By S&P 500 measures, the equity market put in a very good 2nd half of the week last week as earnings season got underway. Recall that the market was off -1% in a news vacuum earlier in the week, and then jumped +2.8% in the back half to finish the week +1.8% – international developed markets were up even more than that. Technically, SPX (the S&P 500 Index) closed the week above its September high and its 50 dma (day moving average) officially reversing the short term downtrend to uptrend by definition. The market message could be interpreted as – a lot of problems noted in recent weeks may now be priced in.
Having said all that, markets were soft overnight on inflation fears and perhaps some back and fill to last week’s rally. The U.S. open looks down a hundred-ish Dow points.
The S&P 500, Nasdaq Composite (large cap growth), and Russell 2000 (small cap value) are 1.8%, 3.6% and 4.1% off their all time highs respectively now. With more earnings reports to come, the market seems to have its sights set on reaching higher all-time highs, if only incrementally, in the weeks ahead. I remain a fully invested bear longer term, but with most Tape signals still leaning bullish and with recent improvements to the short term picture, this does seem to be a good time to stay the course.
Be well,
Mike