Although it would make little sense in relation to the macro backdrop, the bull case for stocks could take a major advance forward technically in a relatively few S&P points ahead. As mentioned entering the week, after headfaking down through a support trend line (that connected a series of lows) last Thursday, we are now approaching a similar trend line that connects a series of highs. To break above that trend line would be positive and it most likely would mean a higher high than the early July levels. These would be 2 quite bullish developments and a welcome sign after 4 months of slop. Something like this could be accomplished in 10-12 S&P points from here – an earnings surprise by an Intel (INTC) or the like tonight would help the case.
Again in light of near record 10 year yields in U.S. bonds, the "risk off" flight into the U.S. dollar, the labor market, pressure on earnings, slowdowns in ISMs, the mess in Europe, and the China situation it would not make much sense at all. Generally the bond market is the one to be trusted if bonds and equities disagree. But in the end prices are prices so it must be respected if this is the outcome.
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund's holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog