Wednesday's Market Minute: Gettin' Nowhere Fast

Given the nature of the current situation and the record-breaking volatility of the first quarter, one could be forgiven for overlooking what the S&P 500 has done this month: not very much at all. The index is effectively unchanged since May began, and Monday’s bounce, while impressive, barely peeked above the 200-something point range that has defined the index since mid-March. Squint on the chart and you will see mostly higher lows; combine that with Thursday’s powerful dip-buying, and the bullish argument is the easier one to make within the context of this generally sideways pattern.

The Nasdaq is certainly a whole different story, but so is the Russell. The former is surging; the latter struggling. Much like the balance struck by the S&P 500, there is a natural division here. For the S&P 500, technicians might describe this plateauing behavior as “consolidation” – finding a home at a new level. But 2,800-2,900 will prove to be more pit-stop than permanent residence, and when we exit, it’s likely to be in a hurry.

The longer we stay here, the more this spring coils tight. Think Netflix in the first half of 2018, or Tesla Motors TSLA in the third quarter of 2019. Very high stakes precede powerful breakouts—and these stakes are high. The stock market is frothy, but earnings guidance could mean little if there’s a medical breakthrough or reopening goes smoothly. With the Treasury rally at an apparent impasse without lower interest rates, the odds continue to favor American tech stocks as the only game in town. But just the slightest surprise from the virus or Washington’s fiscal support, and this range breaks like a twig.