The stock market's rally to a record on stimulus and vaccine hopes leaves little room for error

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The euphoria has driven investor sentiment to new highs, technicals to extremes, and expectations for earnings to very high levels.

With the inauguration — and the risk of disruption — now over, what's next for markets?has risen 15% since the election to historic highs on a series of macroeconomic hopes that have driven sentiment, technical levels, and earnings expectations to very elevated levels.The bad news: The stock market has run up big and there is very little room for error.

"Right now, the whole reflation, stimulus, and vaccine story remains intact," Alec Young, Chief Investment Officer at Tactical Alpha, told me. "But any change in that narrative will cause stocks to falter."It's not just stock prices that are at extreme levels — the euphoria has driven investor sentiment to new highs, technicals to extremes, and expectations for earnings to very high levels.

Technical levels are also at extremes. The 200-day moving average for the S&P 500 is a standard technical metric to measure momentum. The S&P 500 is now 16% above the 200-day moving average, twice the normal levels even in bullish markets. Other technical levels also are flashing overbought.The S&P is trading in nosebleed territory: nearly 23 times 2021 earnings, well above the historic norm of roughly 15-17 times forward earnings.

The good news: bulls have been right, so far. Early earnings reports have far exceeded expectations. The 43 companies reporting Q4 earnings so far have beat expectations by 18%, similar to the 19% beat in the third quarter, according to Earnings Scout.

 

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PR Media for Joe..

The stimulus we MIGHT get in late March or April? LMAO

yeah stock market rally will go higher on 1.0 m people losing their jobs this week you will be in the market owning the most risky stuff when the bubble crashes just a heads up that is coming so enjoy the one program bubble

it is one program just daytrading this scam higher for the last 200 trading days it is a scam have fun

no more errors, only MOON time🤑

thank you very much for your work

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