Which Catalyst Will Win?
The S&P 500 has parked quietly above 2000 for 3 days in row, as volume and volatility dry up. While the bears lick their chops at the potential drop, the bulls admire the "waiting to go higher" set-up. But who wins depends on whose catalysts are bigger and stronger.
The bulls wait for strong earnings reports. Yet I say the handful of solid ones we might get this week won't be enough to sustain the rally -- especially with a big gap down at S&P 1950 waiting to be filled. And the bears are focused on the overall earnings recession that is unfolding.
I've Seen This Movie Before
I track institutional buying in equities for a living. And I'm getting a lot of disturbing clues lately while the market appears tame. Like Scwhab's Liz Ann Sonders going "neutral" on US stocks. Or Jim Paulsen of Wells Fargo saying that the "valuation re-set" isn't over. And let's not forget HSBC's head of global allocation dropping their weighting in the S&P to 0% from 5%!
My bottom line: Clearly, these big strategists see different catalysts now than your average long-only manager who was buying under S&P 1900 two weeks ago. And I still believe caution is warranted until we hear from a lot more companies about their outlook for the economy and business. Believe me, while the market sits quietly, the big guys are quietly buying more puts.
Earnings watch: Intel offered a mixed report last night that should shake up the Tech sector today and it's a big week for Financials. JPMorgan missed last night and this morning brings BAC and WFC, with GS and C on Thursday. I don't think this group can set the tone when a "too-scared-to-hike" Fed is keeping their net interest margin suppressed.
Instead, I'd watch Retail Sales and the Beige Book for market-moving power on the economy.
