A New Cyclical High

On Tuesday, the S&P 500 closed at 1,347, besting its previous bull market high of 1,343 set on February 18th (shown on the chart below). The last two days have seen the market improve upon that, with successively higher closes on Wednesday and Thursday. Stocks are trading higher again today, too, with the S&P currently at 1,364. Considering that there were some high impact events this week with a heavy flow of corporate earnings reports, an important Federal Reserve meeting followed by a first-ever press conference held by the Chairman, and the first quarter GDP report, it has been another impressive display on the part of stock investors.

This week’s market action makes it increasingly appear that the sideways pattern of the past two and a half months, which included a -6.5% decline and subsequent rebound, was simply another consolidation in this bull market. All of the angst regarding the Middle East, Japan, and Europe seems to have only been able to muster enough negative energy to cause the market to momentarily pause again, instead of sending stocks spiraling into the abyss as widely feared.

Of course, things can change quickly, so we have to remain on our toes. Next week investors are sure to be bombarded by reminders that it’s time to “sell in May and go away” simply because the calendar has changed, which might create a new round of jitters. But our base case at the moment (subject to change based on incoming evidence) is that the S&P should ultimately be able to carry somewhere above 1,400 before the bull pulls in its horns for good.