Universal understanding underlies the ‘goosing’ of the FANG stocks, overvalued or not, and hence the ability to lift the S&P over the declining tops (coincident with the daily-basis standard-deviation mean) I alluded to all week. Everyone subsequently understood that as crucial to market possibilities of holding together for the short-term. In the new week we’ll review ‘theories’ vs. ‘realities’ of higher debt, inflation and interest rates.

My noon intraday Friday comment emphasized that my concerns are macro overall. My point was that even if they rallied Dow Industrials another 1000 points first, regardless of that being absurd as relates to values, the market risk profile is heightened. 

I speculated on that noon comment that Friday might very well finish as strong as it did last week and give a hint of a rebound that looks like nothing special and then turn on ‘overdrive’ and shift action to pour-on-the-gas late in a pre-weekend session; essentially like we saw a week ago. Sure got that and a breakout (for now) above daily technical resistance. 

Well that’s what was done; and as suspected caught bears by the short hairs, if you will. And that’s what (for traders) I thought would be the most likely way to finish trading going into this weekend. The proximity to just breaking-out of a ‘congestion zone’ (actually under S&P 2750 level with time & price moving on) was too inviting not to see them do such a rally.

No doubt, credit markets having a notably weak week, with bonds now breaking a 7-week losing streak, notably added to the S&P’s potency. It should be observed that some of the recent Treasury buying has probably in reality correlated with increased concern about the equity market health, and thus stimulated modest flight-to-safety (relatively at least) buying. 

Ironically the equity market responded favorably now, even as related to suspicions of slower earnings growth as the economy revives. I suspect that time is not encroaching but is used as a rationale to try to dissuade concern about the Fed moving to ‘formally’ hike rates in March, as they essentially try to get out from behind-the-curve, a spot they worked into.