What a difference a week makes! Sound the trumpets and wave the flags! The sell-off is over! Naturally that means sell but first the good news.
The S&P 500 posted its best day of the year so far on Tuesday, rising nearly 2%. The gains were mostly fueled by the corporate perfection that was Apple (AAPL), as we talked about yesterday.
Traders are also mellowed by a return to normalcy in markets and the volume of ghost stories most people don't want or need to pay attention to very much. The yield on a 10-year note (^TNX) has gone back above 2%. Traders don't mind low; they just don't want a free fall. Remember the illusion of control is the Fed's strongest weapon.
Speaking of which, remember Ebola? Talk about market friendly pandemic narratives! Ebola fever built, spiked and broke over the last five days. According to a Pew study published yesterday 41% of Americans are "very/ somewhat afraid of someone in their family being exposed to Ebola." Not to make light of it but you have a better chance of being exposed to a Kansas City Royals World Series championship than Ebola. Neither is going to happen.
Now it's time to test to your mettle as contrarians. Your natural instinct here is probably to run out and buy stocks. If that means replacing what you sold at the bottoms when we were 6% lower it's time to re-think your strategy. Remember, good markets are slow. The recovery of the last five days has been anything but. Apple drowned out a lot of cruddy numbers. Coca-Cola (KO), Verizon (VZ), McDonalds (MCD) even Chipotle (CMG) were lousy yesterday. It's just that no one paid attention.
As usual it's about timeframes. Most of you shouldn't do much of any trading. Still, if you've had a stressful week use this as a graceful exit. Be selling into this rip and look for a retest of that 200 day moving average.
As far as this rally is concerned the week is probably over, whether the calendar knows it or not.
