Beware the Ides of March especially if this quirky upward move extends, as I believe is unlikely past the short-covering spurts, amid negative economic data, while bolstered basically by strong Oil (which we desired); plus the month-end gains that were suspected. Within the next two weeks, in what is normally fairly firm times for markets seasonally, there are known unknowns to contend with.

There is a lot of ‘tension on the tape’, which is partially due to the low liquidity of this environment. That tension contributes to swift moves in both directions, as is amplified when the S&P (in overbought daily-basis territory) takes out a most recent high point; which again quickly scrambles shorts, but has almost nothing to do with underlying corporate expectations, or National growth. 

Yes some believe that over 3% inflation is built-into the middle of this year, and that somehow is viewed bullishly. When the market breaks next time, the same pundits will moan that such a development would allow the Fed to hike rates; at the same time they will then view higher rates as miraculously positive. Actually they are (or would be) ‘if’ we can get out of the earnings recession. 

Mostly such pundits or technicians are looking at the overbought condition as a confirmation of strength, and it is. However, they are overlooking the technical breakout in the S&P (thus the short-covering); and even the financial fund flows due to further breakdown in China, and the lack of ingredients for a sustained move. And that’s ignoring the G20 meeting and Middle East renewed flare-up prospects (dubious cessation of hostilities). 

Also yield on the 10-year continues declining, which is not a good sign for the idea of recovery. My view that this market had issues with reversing during this last week of February has been discussed as a rocky road to travel short-term; at the same time I believe the detour down the road a bit will lead towards new efforts to probe the phony double-bottom (real technically but induced by tales of non-existent oil deals) at what (in cash S&P) is called ‘the war of 1812’