The chart we showed you yesterday showing the 144 day cycle of the S&P and how the current move is totally a FED inspired move. Yes, there are all the secondary things like Trump tax cuts, Trump tariffs, Covid, the current potential reopening, and the coming infrastructure buildout, but the overreaching factor is FED loose money which makes everything in a sense artificial.
The past week or two there is an underlying thread that maybe the reopening will not be as great as expected and how that means the 10 year interest rate is done going up, but the players then cannot figure out how to unload all the stock they have compounded through all of this, so then we get various reasons why stocks are headed higher. Of course if things are so good that stocks should go higher then interest rates should go higher.
Here is a chart that puts all that together. It is the S&P price divided by the 10 year interest rate, like at the moment 4141 divided by 1.64 .
Here is the chart I follow of the S&P divided by the 10 year interest rate. The version shown is based on weekly data. You can see that the SPX divided by the 10Y peaked on the week of August 3, 2020. Since then with the rise in the 10 year rate, the adjusted price dropped under the trend line until March 15 2021. Since then we are in the fourth week of the market players trying to keep interest rates under control, that has allowed the adjusted SPX to rise up to the trend line.
What is next, are interest rates going to drop because the economy is weak , and does that mean the S&P will decline. , or is this the inflection point where the ten year rate rises to 3.024 % because of a strong reopening? If either happens, the red trendline on the chart is a big resistance factor, and the S&P is headed down to the 3000 area at a minimum. 3024/3.024 = 1000 on the chart. If on the other hand stocks react badly and flip the median, then we are headed down to 2000 on the S&P.