many years ago Mark Haines, the late, great CNBC anchor, gave me the nickname the Optimistic Armenian. I bring that up because as I look at the continuation of Friday’s rally early on in today’s session, I’m seeing a lot to be optimistic about.
Last week I told you that if we were able to work through certain levels in the S&P, the nonbelievers would start to come in. That’s exactly what happened. As we took out some key technical levels such as the 100-day moving average, a lot of that scared cash that had been sitting in fixed income was squeezed back into positions. Just like that, the 200-day moving average—even though it’s not that far off from the 100-day average—feels like it’s within reach. There’s a different tone to this market, like it has a bit of a tailwind. I think it could be finally ready to break out.
I’m not the only one. Adam Westphalen, chief investment officer of Mosaic Portfolio Strategists, was on the show this morning, as he is each and every Monday. He reminded us that earlier in the year, 1250 was the support in the front-month S&P futures contract. Adam said the old support is the new resistance and what happens around the 1250 will give us the next clue about where the market will go. Overnight, we printed as high as 1243—and 7 points is nothing in this environment.
Not only am I getting confirmation from the Adam Westphalens of the world, I’m getting it from corporate America as well. The expansion of earnings and multiples continues—Caterpillar, for instance, reported earnings that absolutely blew away the Street.
And then there’s the M&A activity, such as Oracle announcing it will acquire RightNow Technologies. Just a few months ago, Larry Ellison, Oracle’s CEO, was quoted as saying assets were “wildly overpriced”—so if he’s got his checkbook out, that really reinforces the fact that smart money is identifying and buying value.
Is there anything out there that could signal a reversal? Of course. The situation in Europe is very dynamic, and because of that we’re always one headline away from a 5% break. But I don’t think that’s going to happen.
As the politics of that situation are slowly worked out and the overall investment community comes to the realization that another 2008 was priced into this market but never arrived, more and more of that cash that’s been on the sidelines will go back to work. As we make our way through key levels, even the staunchest of non-believers will get squeezed back in. Hopefully you’ve been listening to this Optimistic Armenian and are already in position to take advantage of it.