SPX rally back to new highs underway, led by Financials

Short-term US Equity trends look to have turned back higher Friday following a frustrating time for bulls and bears alike in recent weeks.   Despite a plethora of bad news domestically and overseas, US Economic data and good earnings have helped markets largely ignore the factors that normally might be expected to ramp up volatility.  Technical structure, and breadth have improved markedly in recent weeks, while sentiment is not yet bullish enough to think Stock indices might peak out.   While the back half of October might prove more volatile than the first half, Friday’s rally looks likely to lead prices back to new highs for S&P and DJIA and could result in NASDAQ challenging its former all-time highs.  Bottom line, Equities remain in great shape, and as discussed yesterday, I expect that Equities bottom into Rosh Hashanah and likely rally up into Yom Kippur this year. 

Overall, I expect that this week’s inability to have sold off given the combination of several disturbing news events likely is a sign of strength for the US Equity market.  Friday’s surge to multi-day highs should mark the start of a push back to new high territory, and I firmly believe that the Rosh Hashanah-Yom Kippur cycle likely is inverting this year.

Thus, upward follow-through should materialize next week, and might be led by Financials along with Consumer Discretionary, which both have begun to demonstrate excellent near-term signs of relative strength this past week.

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