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.