Recap: 10 Amazing Years Since Market’s Historic Bottom!

After a week of unstable movement on the heels of Trump’s aluminum and steel import tariff announcement, the market has taken a breath of fresh air before its next move. Import tariffs are far from being on the backburner, but Trump has backed down from his original hardened stance, the market now trading higher than it was at the time of the initial announcement.

One of the most salient facets in recent trading has been the sheer stubbornness of correction buying. Market players could barely wait before jumping in and buying any sign of weakness. Fear seems obsolete, concern nowhere to be found – even though a whole cadre of experts are warning that Trump has laid down the groundwork for an economic disaster.

Market players, on Friday, heaved a sigh of relief that the import tax drama and the trade war seemed to be behind us. That was coupled with the fact that diplomatic progress had been made with North Korea. That notwithstanding, players were caught entirely off-guard when the market soared against the backdrop of better than expected employment figures. February’s employment report pointed to 313 thousand more U.S. hires. In light of that, the NASDAQ soared 1.8% on Friday to a new historic high. The Dow Jones is traded just 5% beneath its all-time high after having surged 1.8% on Friday as well, up 3.3% on the week. And the S&P 500 is trading just 3% beneath its all-time high, up 3.5% on the week.

Not only were the job numbers better than expected but the big surprise was that one couldn’t discern any concern among market players about inflationary pressure. A number of Federal Reserve members had noted recently that the American economy is close to full employment – but the market paid little heed, its response being the diametric opposite of the bond market’s response.

A big part of the reason that stocks’ reaction didn’t jibe with the bond market’s movement is that the movement in the stock market prompted automatic, uninterrupted buying on the part of computerized algorithmic programs. When carefully assessing Friday’s intraday movement, you can clearly see the tracks of the computerized trading machine. You can barely see a red candle all day long! What we’ve been seeing is unidirectional upward movement, devoid of the typical lows and highs and the movement they bring in tow. In the last few minutes of trading, buying pressure even accelerated!

This coming week, the bull market will celebrate the 10th anniversary of the bottom recorded a generation ago. The S&P 500 is trading up a whopping 312% since the bottom recorded on March 9, 2009. With but a few earnings reports this week, investors will focus in this week’s trading on the economic figures, the most important among them being of course consumer inflation on Tuesday, followed up by producer inflation numbers on Wednesday. These figures are likely to provide a large measure of clarity about inflation before the coming Fed meeting on March 20-21st, when the Central Bank is expected to announce its rate hike.

On a technical level, at these areas, indexes will be going up against resistance levels. Indexes are a little bit tense after rebounding from the low produced in the wake of the import tax announced just a week ago – the 50-period EMA now going through the 2,740 point level on the S&P 500. At the same time, the market has proved that extreme buying levels can become more extreme, recent history hinting that movement of this ilk will continue. If in February volatility skyrocketed, last week it did the opposite and contracted – and once again, it felt like January all over again!

Have a great trading week!