Mr. Pisani on CNBC is saying a lot of people are caught offside today as the economic data doesn't necessarily justify such a move. But it is what it is, people are piling on and the term "goldilocks" is making it back into the lexicon – buried in 2007. Ironically the new normal goldilocks is a -0.1% GDP (ok really 1.5-2%) with unemployment at 7.9%. Not very hearty but the economy is not the stock market as they say. Specific to unemployment the new normal is 7-8% as good, preferably not too close to 7% as lower is now bad… since it means there might even be a hint of QE going away. While I think the effects of QE are overstated it is a massive psychological impact if nothing else. And I might be underestimating any financial impact but other than forcing people into risk assets (the Fed takes away your Treasuries so you need to do something with that money) it's not doing much other than some form of forced substitution. But again, in markets psychology prevails in the near term above all else.
What was a bit tricky today was coming in we had only the second close below that 50 exponential moving average on the 30 minute chart (of SP 500) in 2013. It had only happened Wed/Thu this week. Earlier in the month it had only visited below on the 8th and 15th. That's a very strong trend. But from that bout of relative weakness came the gap and go day we now have. On the positive side that weakness helped work off some of the overbought condition. There are some scary bullish sentiment figures being tossed around (some at records) but sentiment is a blunt tool.
I've mentioned the mid 1510s to 1520s target from the inverse head and shoulders formation from mid November. Below is a graphical representation of where I am getting it. Of course where exactly you place the neckline is up to some judgement and where I put it is not set in stone. But it should be a decent ballpark. For those unfamiliar with this pattern here is a decent explanation.
Any securities mentioned on this page are not held by the author in his personal portfolio.