End of Day Update:
The S&P500 rebounded from recent weakness and ended at the highest close of the year. Declining oil prices were no longer an excuse for traders to sell stocks as oil gave up a portion of recent gains.
The headline justification for today’s rally was a softening of the standoff between Greek leadership and the ECB. Greece’s new leaders are discovering there is a difference between making campaign promises and being held accountable for the unintended consequences of those decisions.
While the Greek situation could continue to unravel, anyone who fears a Grexit already sold. Those that are left demonstrated they are mostly indifferent to the whole situation and are just as likely to ignore the next round of headlines out of Europe.
When the market is sitting 1% from all-time highs in spite of the fearful headlines, it shows it doesn’t care about these concerns because they are already priced in. Market strength in the face of fear mongering is a buying opportunity. That doesn’t mean the rally is invincible, only that bears will need to come up with something new and unexpected if they want to break the market.
Technically the market is acting well. We found support near 2,050 and the 50dma, setting the stage for today’s upside move to 2,070. The pain trade is betting against the bears since further upside will force them to cover their shorts.
While I expect higher prices in the near-term, I remain cautious further out. The last few years have been an easy, elevator ride higher, but a recent increase in realized volatility shows the market’s personality is shifting. At this point I’m far more likely to sell a breakout to all-time highs than buy it. But I reserve the right to change my mind as new information comes to light.
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