We have an abbreviated market update this week.
Much of the mystery is off the board now. The DJIA closed above 21,000. The S&P500 closed at 2399 and change. The NASDAQ closed over 6200. The French election turned out as expected. Oil, despite OPEC statements to further cut production, continues to fall. However, futures were down marginally and the market has been grinding along in a narrow range.
We’re at a technical tipping point in the markets. All three indexes are up against Big Fat Round Numbers. Participants are weighing heavily whether or not the data justifies higher prices from here. As close as the S&P500 is to 2400, there is still not a confirmed breakout. This makes this week important from a market perspective. Historically the summer season can be softer for traders. If this plays out, the markets may fail to push higher from here.
The flip side of reality is that rates are still exceptionally low at this point, and there’s minimal yield to be found outside of the stock markets. So while risk is being repriced, it’s repricing slowly. This keeps a bid in the market.
It may as well be a technical coin flip this week. Whether or not this market breaks out seems to be unrelated to the current data at this point. We’ll keep an eye on how this plays out. For now, the pivot point is 2400 for the S&P500. A close above this pathway is a big deal. One close above 2400 is not the signal though. A SECOND close above 2400 would be a good sign. Closing above 2400 only to have markets retreat sharply the next day could be a negative sign as traders view this market move as ‘complete’ and begin to re-price data.
Fundamentally, the economy still looks good and there is still much hope the Trump tax plan will grow legs and help buy the economy more growth. Keep an eye on 2400 in the S&P500 this week. It seems to be the canary in the coal mine at present. Have a good week!