Market Lab Report - Premarket Pulse 3/21/16
Major averages finished up Friday on higher volume due to triple witching options expiratioon. Central banks around the planet continue their easy money policies as major indices approach old highs. The S&P 500 sits just 4% away from breaking into new high ground, and a few new actionable pocket pivot buy points emerged.
A confluence of events have caused the rally off the February lows: higher oil prices even though trade agreements for an output freeze have yet to be struck; American Association of Individual Investors (AAII) sentiment at bullish lows even below the lows of the early 2009 market bottom; and central banks pledging to keep rates as low as possible. The rally has caused a spate of short covering which, in turn, has pushed the markets higher.
How much further can this rally go? It will come down to the question of whether a loss of confidence in quantitative easing which has failed to spur global growth will overtake the easy money which has to flow somewhere. Indeed, it is likely to continue to flow into equities and hard assets as bonds remain a poor option. Perhaps the saying "Don't fight the Fed" has never held more true especially as a whole gang of central banksters align themselves to keep rates as low as possible.
But as we saw in 2015, this does not necessarily mean a strong uptrend. Instead, it could mean continued elevated levels of volatility while the tug-o-war plays out, which, if the many years of backtesting and more recent actual real-time trading are any guides, can be a close friend to the VIX Volatility Model.
This information is provided by Virtue of Selfish Investing, LLC (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2016 Virtue of Selfish Investing, LLC. All rights reserved.