It was a perfect week for the stock market last week -- five days and five gains. If the current indication in the futures market holds up -- and there is little at the moment to suggest it won't -- the market will be on track to extend its winning streak to six sessions.
Currently, the S&P futures are up more than 9 points and are presaging an opening gain on the order of 0.8%.
The reported impetus for the bullish bias is the conclusion reached at the G20 meeting over the weekend that stimulus measures should continue. In other words, G20 finance ministers tempered the market's concerns about stimulus measures being withdrawn too soon.
The latter consideration, coupled with last week's FOMC announcement that the target fed funds rate will likely remain at exceptionally low levels for an extended period, has effectively sent a message that easy money policies will remain the rule and not the exception.
This perspective appears to be getting the risk trade running again as the dollar is weak while most stock markets around the globe have gained in excess of 1.0% in Monday's trading.
Given last week's gains, the S&P 500 is less than 3.0% from its closing recovery high of 1097.91 reached Oct. 19.
Its ongoing resilience is undoubtedly a factor in this morning's early strength, as participants continue to fret over the prospect of missing out on further gains.
Despite the market's bullish character, though, there hasn't been a lot of faith in the rally. This point rings true in the investor sentiment readings compiled by the American Association of Individual Investors.
Last week just 22.2% of individual investors were classified as bullish while 55.6% were classified as bearish.
Sentiment readings are considered to be contrarian indicators. The remarkable thing about the latest readings here is that bearish sentiment is at its highest level since the week of March 5 while bullish sentiment is at its lowest level since late February, or just before the market took off on its historic recovery rally.
We're not suggesting another 60% advance is in the offing, but if this contrarian indication holds, it would suggest there is ample room for the stock market to keep climbing its wall of worry since few people are positioned for such a move.
The market's resilience is consistent with the view we have held in which it was noted pullbacks should remain short and/or shallow as performance chasing and easy comparisons remained influential sources of support. We continue to see things in the same light, but as before, we maintain that now is the time to be favoring the stocks of high quality companies as opposed to speculating in issues with high risk-high reward dynamics.
Separately, the earnings reporting dies down this week, although there are a number of retailers set to post their results along with the likes of Walt Disney (DIS), Applied Materials (AMAT) and Electronic Arts (ERTS). The Treasury will be auctioning $81 billion worth of 3-year, 10-year and 30-year securities, beginning with a $40 billion 3-year note offering today. Results will be announced at 1:00 p.m. ET.
The economic calendar is on the light side this week. There aren't any economic releases of consequence until Thursday.
In the meantime, Capitol Hill will be a focal point. The House passed its version of health care reform and now the spotlight turns to the Senate, which has yet to put together an agreeable form of legislation that can be held out for a vote.
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