U.S. Equities are putting in a tremendous performance today. Having faltered following yesterday’s blunt reference to when the Fed might take away the punch bowl, the performance today is significant. Within the last two weeks, there had been a number of bearish warnings as S&P’s marked new all-time highs. The most notable is the ‘spinning top’ on the March 7 session that marks the high trade and high settle. There were also a couple of bearish ‘hanging men’ that at least initially, proved helpful.
However, today’s S&P 500 E-mini (CME:ESM14) prices opened below yesterday’s close and is currently trading above the opening level from yesterday, creating a possible bullish ‘engulfing’ if prices remain toward recent levels (1865.00) or at least settle 1864.25 or greater. A bullish engulfing at this stage does not offer the value (bullish implications) it might if it came after a protracted (multi-session) selling period. Still, it would help to negate the bearish implications of yesterday’s weaker price action.
As to the timing of a protracted sell-off, some studies show that equity bull runs usually lasts until the Fed lifts policy rates several times. The Fed is still adding accommodation at this stage. So stronger growth implied by Fed Chair Yellen’s post-meeting Q&A yesterday can be considered more of a plus for equity markets as earnings potential is strong while the Fed is expected to be accommodative still for a long time…or at least longer than “a considerable period”.