Market Update: S&P 500 And Bonds At Cusp Of Bullish Moves, But Which Is Headed Higher?
[First appeared on Seeking Alpha on July 22, 2012]
The S&P 500 (SPY) ended the week near the key 1,360 level for the fourth week in a row. We view the zone above 1,360 as bullish and the S&P 500 could rally up to the year-to-date high of 1,422 if it stays above this level. However, as stocks seem positioned to rally, the 10 year US Treasury is nearing its record high and seems positioned for a further upside move as well. In fact, the S&P 500 and the bond market have been moving in lockstep since mid-May, which is an unusual situation. This week the market has focused on earnings, which have generally come in in-line with much reduced analyst estimates, tough the theme seems to be "revenue misses, but EPS beat expectations." Also, Ben Bernanke spoke before Congress and expectations for QE3 are rising. In this update we will look at the recent price movements in the S&P 500 and other major indices as well as bond prices, review the S&P 500's valuation and macro news, examine "Risk On / Risk Off" indicators and present a bull and bear case for the market going forward as well as our investment plan.