Given where we are, we could easily see a 40 to 50 point gain off of Friday’s lows taking us to 2076 to 2086. Both levels are close to major retracement levels and known price resistance drawn in red.
But with bulls making noises about SPX revenues and ex energy (positive but bordering on flat) and the odds of a June rate hike having fallen to 18%, I don’t think we will see a “hard” reversal.
Alternatively and absent a shock, we could easily see lazy trading in a confined zone until around June when the market generates downside momentum, particularly so should the Brits vote to leave the EU on June 23rd.
The June idea was borrowed from Tom McClellan who notes: “During an election year in a 2nd presidential term, the May 1 to Oct . 31 period averages -1.6%. In other words, “sell in May” is back on. That’s not the last of it, however. May 1 is actually not the ideal time to exit in a 2nd term election year. That point is actually in June to July.”
The market could easily wait for the Brexit vote, Q2 clues and hints about Q2 GDP growth before making a major decision.
Meanwhile high levels of equity exposure, insider selling and elevated put/call ratios and high levels of redemption's in QQQ and SPY are saying sell.
Thus, we are left with hard reality of trading what we see.