Strong Rally by Small Caps & Growth; SPY Reaches the 61.8% Retracement Level - Chaikin Analytics

Strong Rally by Small Caps & Growth; SPY Reaches the 61.8% Retracement Level

US equities finished higher in Wednesday trading led by small caps and growth stocks on the news that GILD’s remdesivir helped patients recover faster than standard of care. The FOMC left rates unchanged. Additionally, 1Q GDP declined the most since 2008.  Treasuries were mixed with the curve steepening. The dollar was weaker on the major crosses. Gold closed down 0.5%. WTI crude settled up 22%. 

The S&P 500 has pushed to the 61.8% retracement level of the decline. While this is a logical place to pause, nothing is guaranteed. Just above, at 3,005, is the declining 200-day moving average. Fiscal and Monetary stimulus have combined with hopes of economies reopening to drive a sharp rally in the index since the March 23rd lows. On April 7th, in these pages, we wrote that a break of the 2,650 level ($265 for SPY) would open the door to upside to 2,800 – 2,900 ($280 – $290 for SPY), which has now been achieved. Resistance is now in the 2,950 – 3,005 range while support is in the zone between 2,750 and 2,800. 

S&P futures are up 0.2% in Thursday morning trading on the back of well-received reports from MSFT, TSLA and FB. Asian markets were higher overnight but European markets are mostly lower. Treasuries are mixed. The dollar is weaker on the major crosses. Gold is up 1.1%. WTI Crude is up 14.9%. 

At 8:30am we will get the report on initial jobless claims and estimates stand at 3.25 million according to Fact Set.

Looking at Market Breadth 

S&P 500 Breadth

Looking at the percentage of stocks in the S&P 500 that have a Very Bullish or Bullish Rating at Chaikin Analytics, we can see that this metric has moved up to 13.2%. Bullish investors want to see this metric continue to move higher to signal that the technicals are improving for the stocks that have solid fundamentals in our 20-factor model. 

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