Futures are up a bit after yesterday’s quiet action. The markets did a good job digesting last week’s powerful gains as the Fed starts its two day meeting. Statements will be released on Wednesday at 2:15. On Thursday, the ECB’s Drahgi will have his turn to shoot some rounds with that Bazooka he promised last week. Most people I talk to still hate the market and think that this is a time to sell the strength. I’m not so sure, as there is a lot of participation across sectors and markets continue to climb the “Wall of Doom” (typically it climbs a wall of worry). You don’t have to be “all in” or chase the tape, but rolling up shorts and fighting the rally since the June lows with a thesis has not been fun for those with that plan. It’s hard enough trying to be flexible.
If SPX continues to hold 1374-1376 throughout the course of this week, there are enough trapped shorts and money on the sidelines to push us up to 1395-1405, and then perhaps all the way to 1415-1422. We are at the upper end of the channel which has been a better place to sell than to buy. In the same way, buying on the lower end has been better than selling. So keep it light and know your levels as the headlines start rolling in.
P.S. I know there are a lot of problems out there. Our markets bottomed over 4 year years ago and we still have a ton of them here in the U.S. Typically when the “World is Fixed” or economies are humming, markets are close to a top. I stand by the macro thesis of S&P 1700 by 2015 over the bear case of S&P 1000 by 2015.
Disclosure: Scott Redler is long LVS