Commentary: Paul Ebeling on Wall Street, ‘This Market has Legs’

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Last Week’s Action

Thursday the Fed Chairman jettisoned the Phillips curve’s idea that rising unemployment means less inflation. In fact, he stated that there is no empirical evidence to support the notion.

Technical Analysis

NAS Comp gapped modestly higher, rallied and faded to a modest loss on the session Thursday. While it showed its own Doji, it was loose. Thus, this Doji was not as much an indicator as the 1 that appeared on the S&P 500’s graph. We are 13 sessions up in this move off of the 10-Day EMA. Perhaps it can squeeze out another solid move the day after the pause will be Key.

S&P 500: 7 sessions to the Northside was followed with a gap to a tight doji on Thursday. After a steady move up or down, a Doji suggests change. It can also indicate a pause to refresh. If so, it is a continuation Doji, as the move in place will continue. We will see which is true, the leadership is strong.

This market has legs

When the stock market reversed from the depths from the 23 March lows the pessimists were ready. It cannot last just look at the state of the economy, they said. It’s going to crash again.

That message was repeated over and over even as the S&P 500 advanced more than 50% and added $10.2-T in value. Since surpassing its pre-C-19 chaos high last week, the index has notched records more than 6X.

The market’s relentless run has prompted many analysts to check what is occurring. Some now see evidence to justify further gains, citing everything from the Fed’s new policy goals to sidelined piles of cash that are ready to be deployed.

I cannot see what is going to change people’s perspective on why we should stop buying,” said vice president of trading and derivatives at Charles Schwab & Co. “If we continue to buy and we have a few more pullbacks, which I think is likely, people will just continue to jump in and buy those dips.”

In the wake of the S&P 500’s strong Bull run, a number of strategists have raised their forecast for where the index will end the year.

Those at Goldman Sachs Group and RBC Capital Markets did so earlier this Summer.

Friday chief investment strategist at BMO Capital Markets, reinstated his year-end S&P 500 target of 3,650. That represents a roughly 4% advance from current marks.

Pointing to the resourcefulness of American companies and society’s ability to pivot, US stocks have exhibited an unprecedented price recovery that tests most major academic and common-sense assumptions.

Do not fade the Fed, as it unlikely the central bank would allow a large decline in stocks to happen.

When investors believe that, it gives them confidence and they are willing to take on more risk and buy stocks even though valuations are high. There are several Bears that have capitulated.

The weight of the evidence in my work supports a positive longer-term market outlook, as the ultra-low rates helps drive the market North.

Negative real rates, which take inflation into account make stocks, as well as certain other hard assets like homes, particularly attractive at a time when retail cash in money market funds is hanging near record levels, Some of that money could find its way toward equities, he said.

Have a healthy week, Keep the Faith!

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Paul Ebeling

Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he it the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.   
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