- SPY closes higher on Friday as investors cheer doveish Fed comments.
- SPY set to rally again on Monday as futures point higher.
- Bitcoin bounces 7% as risk returns ahead of earnings season.
The major equities indices closed higher on Friday as markets rounded out the week in an ebullient fashion despite the surging inflation print mid-week. That has threatened to wobble any optimism as fed funds futures price in a 100-basis-point hike before Fed members Waller and Bullard dampened fears with some doveish remarks. That all served to help equity markets recover intraday on Wednesday, and the situation followed though into Friday with a strong positive end to the week.
SPY stock news
The situation on Monday looks ever more optimistic now with investors choosing instead to focus on earnings and forget their inflation fears. 75 basis points has been deemed acceptable, and now earnings season cranks up a gear with some big names reporting this week. The equity rally looks set to continue based on the latest sentiment and positioning data, which are close to extreme fear and extremely underweight equities. The Fed has recently actually expanded its balance sheet despite QT.
Fed Liquidity Data => short term support for Equities...
— Douglas Orr, CFA (@EquitOrr) July 18, 2022
=> a tail wind VS expected headwind from weak earnings season... pic.twitter.com/UJqiM8UNOy
As mentioned, positioning is extremely underweight equities.
New record low. pic.twitter.com/KpWQpEkyfp
— Macro Charts (@MacroCharts) June 25, 2022
Company buybacks are set to restart once the earnings blackout is cleared, and that will create healthy demand across the entire market space.
With Bearish Sentiment Off The Charts, $5.5 Billion In Daily Stock Buybacks Set To Flood Markets https://t.co/hMh30d3A0q
— zerohedge (@zerohedge) July 17, 2022
So that is why we favour the rally in risk assets, and Bitcoin has certainly taken the bait and is already 7% higher this morning. Equities in Europe are also higher, and currently US futures are looking at an opening about 1% higher across the main indices.
SPY stock forecast
The first target remains $395 with the gap to fill at $401. That then will bring the target and old high at $415 into focus. This next move will likely depend on how the earnings season progresses. Recent negativity has seen analyst forecasts trimmed somewhat, and that may mean those consensus targets are slightly easier to achieve.
Maybe the bar for earnings is not set that high………Ex Energy, hurdle rate for Q2 is at -5% YOY in both the US and in Europe
— The Market Ear (@themarketear) July 18, 2022
That could then allow this rally to stretch to $415, and a break of that level would see $435 as the next resistance.
SPY chart, daily
The author is long IUSA.
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