Well, it looks like it might be bye-bye record-day for the S&P 500 again.
Ever since the Dow broke its Oct. 2007 closing high earlier in the month, the S&P 500 SPX -0.39% has been torturing investors by dangling the prospect of breaking its all-time highs (closing: 1565.15 hit on October 9, 2007; intraday: 1576.09 hit on October 11, 2007).
After the all-nighter pulled by officials in Europe getting the guts of the Cyprus deal done, markets enjoyed a brief moment in the sun, only to get dinged by comments that maybe Cyprus is just the template for other bailouts.
So when IS that rally going to get started again?
Dan Greenhaus, chief global strategist at BTIG, says “if the last several years are any indication, we’re entering a more difficult period for equities that has seen returns significantly underperform other periods.” But Greenhaus isn’t entirely downbeat.
“Ultimately, though, the fundamental drivers of higher prices remain in place and while volatility can arise at any point, the only question is whether equities will be higher, six, nine or twelve months from now and we believe the answer is yes.”
Stephen Pope, managing partner at Spotlight Investing, says that the whole Cyprus drama has been a distraction for U.S. stocks, and while another Italian election could hit investors by June, Wall Street is well-placed to keep rising, both on a fundamental and technical basis. He points to the fact that that momentum oscillator, the Relative Strength Index, is now just above 60, which he says is far from overbought territory.
“The S&P closed on Friday at 1,556.89…I do not worry about the next resistance from my earlier analysis at 1,560.86…I am far more focused on the next push to 1596.69, call it 1,600 and then 1,625.64.”
He and others say that at least in the short term, there is hope for some market records as long as this week’s batch of data provide some expected comfort to the markets. Oh and then earnings season is around the corner.
Henrik Drusebjerg, senior strategist at Nordea Bank, says if data out this week confirm stronger-than-expected growth in the U.S., stock records should be broken. And then it’s earnings time.
“In a week or so, investors will be sensitive to the upcoming earnings season. And after that we expect macro numbers to weaken, because of the sequester. But my take is that investors due to the current stronger growth numbers, see effects from the sequester as short term head wind. ”
As for those earnings, Drusebjerg says expectations have come down a lot from both analysts and companies giving guidance, and it’s more likely that companies will meet expectations and maybe, surprise on the upside.
Adam Sarhan, chief executive officer of Sarhan Capital, believes markets will get back on track, noting that they really only fell for a day or two on the Cyprus news and then closed in the upper half of the trading range last week, which he says is bullish.
The key question for him is: Will markets going to break above the recent highs and continue rallying? So far, the primary driver has been easy money from the Fed and other central banks and that appears to be alive and well.
And it also depends on what Sarhan terms the Great Mini Rotation:
“Really, the bottom line since this rally began in November has been a relentless mini-rotation from one sector to another. Just when everyone thinks the market is going to pullback, a new sector emerges and leads the market higher, while the former leading sector pauses and then rotates again and leads. As long as this continues, one should expect this rally to continue.”
So as long as the Great Mini Rotation continues, stocks will likely advance, says Sarhan.
Time will tell, for patient or not-so-patient investors.
– Barbara Kollmeyer
Follow The Tell blog on Twitter @MWBarbaraKollmeyer
Follow The Tell blog on Twitter @thetellblog