Complacency Has Become a Bullish Indicator as Economic Concerns Subside

Early on Monday, it looked like investors were going to rotate into big-cap technology and leave the small-caps behind. However, as the day continued, the action broadened, and the Russell 2000 managed to gain 0.75% by the close and build nicely on its 2% Friday increase. The Nasdaq 100 QQQ tacked on another 0.8%, and the S&P 500 moved even deeper into new high territory with a 0.8% rise.

Breadth wasn’t nearly as strong as on Friday but finished the day with around 5,700 gainers to 3,700 losers. There were over 1,300 new 12-month highs, which makes it look like a very healthy bull market. There was no narrow, big-cap leadership.

Strong markets stay sticky to the upside as buyers really don’t have any good reason to fight the momentum. There was no significant news flow on Monday, and investors are much more worried about being left behind rather than buying things that are technically extended.

Bonds managed to bounce back after a poor start, but what is most notable about this market right now is that there aren’t any significant economic concerns. The bears will grumble about signs of increased inflation and slowing growth, but the market is pleased that there will likely be two more quarter-point cuts this year and no significant economic slowing.

While we have several earnings reports Tuesday morning that will attract attention,  the most important ones will not start rolling in until next week. Some surprisingly poor earnings results or guidance could shake things up, but no one seems very worried right now.

Market players may be complacent, but until there is some news to serve as a catalyst that is bullish rather than a contrary indicator.

Have a good evening. I’ll see you Tuesday.

At the time of publication, Rev Shark had no positions in any securities mentioned.