HedgeFundLIVE — Let’s rewind back to exactly one year ago on April 13, 2010 and see what our Chief Market Strategist Jeremy Klein had to say on that day:
Fairly Valued –Both the E-Mini and pit traded S&P 500 future settled UNCH’d yesterday within a 5 handle range, nearly the smallest in 3 years. The Naz finished up half a point while the DJIA returned less than 10bps. The forward P/E on the SPX sits at 15.34x which closely approximates the 14.97 average from January 1, 2006. If one excludes the days post the all time high on October 11, then he almost pins the tail right on the donkey with a 15.42 mean. Let’s not forget the VIX as it sits on two year lows and has no sign of slowing its decline. Traders even took the top line miss out of Alcoa last night to kick off Q1 earnings season like a champ. While many others strategists would like to classify the current market as fairly valued, I quite bluntly call it boring. Even my wife said we should have stayed an extra day up at Niagara Falls which ultimately would have finished with a trip to the Guinness Book of World Records Museum.
What isn’t boring, however, is the set up for the rest of the week. While today may remain quiet with no economic news of any oomph on the docket and INTC reporting at 4:15PM being the only earnings items of note, yesterday’s action actually may make the markets worth watching. The abundance of pure Rocky Mountain air has troubled the bears since we have blasted through 1150 in the SPX, for the last time stocks traded at these levels, they were in the process of collapsing with 50 handle day ranges thereby leaving very few technical footprints in their wake. Consequently, those who have positioned for a major retracement of this impressive move from the February lows have had little to grab onto to put up a legitimate defense. Yesterday, after enduring much pain in the prior month, the shorts finally got their wish with the creation of the next great line in the sand at 1198.50 in the E-Minis as that represented the overnight spike high in response to the announced formal bailout of Greece by the EU and the IMF. Add in the fact that 1200 backstops this level, which was not even close to being tested during the day session, and you might have found a couple of market naysayers who even cracked a smile as it will take some heavy lifting from some of the big boys to get us though the heaping pile of wood sitting less than 1% above current levels.
Of course, we do have the equity version of murderers’ row coming in the next few days as JPM and GOOG follow up INTC tomorrow with GE and BAC stepping up to the plate on Friday morning. A week from now, we will also have heard from IBM, C, GS, MS, JNJ, and YHOO. By my calculation, that’s over $1.5 trillion worth of market cap releasing earnings which, along with the inevitable battle for 1200 in the Spooz, might just move that magical level of fair value around a bit to put yesterday’s ennui in the rearview mirror.
S&P 500 June E-Minis Key Technical Levels
Support: 1185.00, 1183.00, 1171.00, 1166.25/65.25, 1161.25/60.00, 1156.50
Resistance: 1191.00/92.50, 1195.75/96.50, 1198.00/98.50, 1200.00, 1210.00, 1214.50, 1220.00/20.50
Where we were then:
Where we are now:
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