I’m seeing big buyers of SPX call upside around 1850 and 1860.  Upside vol is cheap, and unless Yellen destroys the party, market can rally into long weekend.  Expecting a re-test of highs on cash deployment and continued decent earnings off LOW BAR into earnings season.

Tim Seymour

Tim Seymour

Where have all the bears gone?  Last Friday people were talking about crashes and we said that sentiment was too bearish (AAII Investor readings) which really meant we were set for a turn higher…US macro is more than “spring loaded” from a combination of 1Q weather weakness and real demand.  Today’s CAP UTIL at multi year highs to pre-crisis levels, Ind production beat by a mile…and housing starts were very strong in single family component.

Russell 2000 (small cap) has largely been a pain trade for short players all year looking for cracks in the rally.  IWM gave 7% back in a week but expect many shorted into the hole on Friday when world seemed to be ending.  The index had an impressive bounce off the 200mda the last two days setting stage for a rally I would not challenge until mid-next week when markets are past their Easter sweets. I would be covering IWM shorts if you haven’t already….

Chinese internet stocks are interesting again as Alibaba is raising all boats…  BIDU, Tencent very interesting after big pullbacks with valuation, yes valuation arguments to be made with those names.

Gold rallies are bear mkt rallies and vicious and deceiving.  Gold will break $1300 today or tomorrow and move to $1250 before finding temp support. 

  •  No inflation
  •  US growth is very real
  •  Fed is on course…

...And Yes, EM can continue to rally in this environment.  Less bad from China is good enough.  Currencies were a little overdone and have cooled off a bit paving way to test and push through recent highs.  The spread of EM to DM on the EEM v SPY had respectable and tradable 4.5% pullback before reversing small.  Get back into this trade.

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