The market was still frustratingly flat, but Thursday was a bit different than the previous days this week. Monday and Wednesday weren’t as good as the averages implied, and Tuesday wasn’t as bad.
Thursday, however, was actually a bit better than the moves in the averages would make you believe because of two main reasons.
First, economic data (especially housing) was good, and at the end of the day the economy has to be the catalyst to power this market higher.
Second, the small caps and “momentum” sectors continued to rebound, with the Russell trading well and NBI and QNET trading with some strength for the first time in over six weeks. It’s too early to call a bottom yet, but there’s no question the space (over this week) has traded better.
Bottom line is the fundamentals for this market remain largely static (although it’s looking more and more like the Ukraine situation may improve over the weekend, as Petro Poroshenko may win easily). Despite that, sentiment remains very negative and, as a result, the short-term “pain trade” is likely higher. But again, I don’t expect any material rally above 1,900 in the S&P 500 without a rally in Treasury yields or further improvement in the economic data.