S&P 500 Walking The Tightrope To All Time Highs

Feb. 04, 2013 8:21 AM ETIYT, IWM, SPY2 Comments
Jaimini Desai profile picture
Jaimini Desai

The stock market's impressive move higher continues. In a previous article, I gave my reasons for anticipating all time highs. Already, indexes such as the iShares Russell 2000 Index (IWM) and the iShares Dow Jones Transport. Avg. (IYT) are in record territory - exceeding highs achieved in the prior bull market.

The market's original launch began in November with the fiscal cliff drama which caused an almost 10% sell-off in the indices. However, there were some constructive developments indicating accumulation, noted in this article. The market bottom coincided with positive statements from Congressional leaders on the White House lawn regarding the ongoing negotiations.

Since then, the SPDR S&P 500 ETF Trust (SPY) has not looked back. There was a brief bout of weakness prior to the actual deal being signed, an outcome the market was clearly forecasting based on price action. In 2013, the market has been in the midst of a 100 point melt up with barely any weakness.

In this article, I want to examine the perfect brew of central bank liquidity, economic data, and technicals currently powering the market higher and whether it is sustainable. Most interesting has been the data, which seems to be in the sweet spot of indicating better than expected growth, but not so much growth that the Fed would be inclined to step on the brakes with regards to liquidity injections via asset purchases.


The most important news has been the sterling performance of Q4 earnings with 63% of companies beating earnings estimates and 62% of companies beating revenue estimates according to Bespoke. This is evidence that the Street grew too bearish following the European malaise in the summer and fiscal cliff negotiations in the fall with aggressive downgrades. Part of this rally is due to a readjustment in perceptions as

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Jaimini Desai profile picture
I am an independent trader. I began actively trading in 2008 and my perspective is shaped by the collapse of 2008 and the incredible rally of 2009. My approach consists of seeking out fundamentally strong stocks that are unloved by the market and then assessing general market conditions to manage risk. Outside of the markets, I enjoy playing tennis, working out, and pushing myself to conquer my fear of public speaking.

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