SPDR S&P 500 ETF Trust (SPY): Today’s Upside Will Set the Stage for a Run
Wednesday’s explosive upside move in equities has set the stage for a run at my 2470 target even sooner than our June forecast. This view is buttressed by the belief that while stocks around the world have surged to new highs unabated, recent “Trumpidation” surrounding the reflationary narrative has resulted in meaningful pullbacks to support across Yen, Yields, DXY and Energy.
Importantly, those critical macro trends have resumed in earnest and possess meaningful upside from current levels which will in turn provide yet another Bullish upside catalyst for equities which never so much as flinched even as the macro wobbled; a Bullish divergence.
That S&P Energy is rallying 2% off key support at the 200 day ma with WTI flat is another Bullish divergence. That WTI is flat is not great, but clearly not a dealbreaker. Emerging Markets continue to break out while Ruble, Real and Rand all continue to firm even as the DXY has resumed its uptrend perpetuating our “virtuous dollar cycle.”Europe (Germany, France, Spain, Italy, UK) and Japan which have stood their ground in the face of Dollar weakness are now in a strong position to break sharply higher as their currencies weaken and Central Bank policies diverge (finally).
In the US, Small caps, Transports, Industrials and the NASDAQ are all at new highs with Bullish bipartisan sector support from both sides of the aisle, cyclical and defensive. I am mindful of overbought conditions, but price is the final arbiter and there is little in the action of the market itself to suggest that we have reached exhaustion. If I see something, I will say something. For now, stay classy, and stay long to 2470.