Well, folks, March never happened. With the Fed’s trillions of Powell-bux flooding the market, equities have pushed back up to February levels, erasing the March. During last night’s session, small caps started to weaken, but they perfectly tagged the support line and have been blast higher ever since.
You can see the importance of this line more clearly with a wider view. I pointed out this cup-with-handle pattern before it completed, which it did yesterday, and last night’s weakness validated that what used to be resistance is now support.
The really big picture, of course, is that fear has left the building. We had surged from 11 to 86 on the VIX in a matter of weeks, and volatility has been collapsing ever since. We have getting ready to get back into the 20s, all with the worst economy of the past 90 years.
The next three days are going to be packed to the rafters with high-tech companies reporting their earnings (although I’m really not so sure how much these events matter anymore). The NQ has had a 50% rise since its lows last month, and it is nearing another important delineation of support and resistance. A strong embrace of results from the tech monsters (GOOGL, AAPL, FB, AMZN, MSFT) will decide whether this line remains resistance or changes roles.
One curiosity is that bonds are not selling off in light of all this equity strength. Sure, they’ve eased up a little, but as I’m typing these, they are actually up. Far more important is that green tint I’ve drawn below. If bonds cross above it this week, that would be a huge splash of cold water on stocks. I suspect we’ll need to wait until tomorrow afternoon (Fed day/Powell presser) to find out.
My decision to stay very “light” in my portfolio continues to feel like the right move.
