More Bullish: S&P 500 Levels, Refreshed

Takeaway: Above 1519 (weekly closing high), the US stock market is more bullish; below it, less bullish. Risk changes fast.

This note was originally published March 05, 2013 at 11:38 in Macro

Tops are processes, not points.

That’s certainly not to say we’ve reached the peak of the domestic equity market, however.

Rather, it’s a less-than-subtle reminder – especially to all those who are trying to make their respective careers by calling for what could eventually amount to the third major top in the US equity market of the past ~13 years – that risk can get exhausted in both directions – particularly when the fundamental research signals continue to confirm the price trends.

On the fundamental research front, the recent string of domestic economic data has been quite confirming of our 1Q13 Macro Themes – particularly our #GrowthStabilizing and #HousingsHammer views:

  • ISM Manufacturing PMI: 54.2 in FEB from 53.1 in JAN; New Orders up +4.5ppts. MoM to 57.8
  • ISM Non-Manufacturing PMI: 56 in FEB from 55.2 in JAN; ; New Orders up +3.8ppts. MoM to 58.2
  • Conference Board Consumer Confidence Index: 69.6 in FEB from 58.4 in JAN
  • University of Michigan Consumer Confidence Index: 77.6 in FEB from 73.8 in JAN
  • Correlogic Nationwide House Price Index: +9.7% YoY in FEB from +9.7% in JAN; the +11.3% rate of YoY appreciation in non-distressed properties was the fastest pace since 2009

As a reminder, the key takeaways from the aforementioned themes were (as it pertains to domestic financial markets):

  • LONG Domestic Equities (up over +8% YTD)
  • SELL/SHORT Fixed Income (UST 10Y yield up around +14bps YTD)
  • LONG US Dollar (DXY up around +3% YTD)
  • SELL/SHORT Commodities (CRB Index down more than -1% YTD)

For now – and ostensibly forever – sticking to the #process trumps making newsy, analytically-reckless market calls. Moreover, our #process is specifically designed to help our clients accomplish three things:

  1. Manage immediate-term market risk;
  2. Front-run intermediate-term trends; and
  3. Contextualize long-term cycles with a broad range(s) of economic history.

Process is king and our process continues to support maintaining a bullish bias on the US equity market.

Darius Dale

Senior Analyst

More Bullish: S&P 500 Levels, Refreshed - SPX