Stock futures are gapping higher this morning, following through on yesterday’s 1.2% S&P 500 (^GSPC) rally. The bulls are clearly betting that this is yet another “V” bottom sling-shot back to record highs ahead of the start to earnings season next week. Is it really that easy?
The October waterfall decline and the December freeze actually had strong reversal days about halfway through the drop. One of the stronger days of 2014 was October 8th, three months ago today, when the S&P rallied 1.8% in one day. How did that turn out? One week later stocks bottomed at 1820, more than 7.5% lower.
Does that matter? Well if they held on through that pain the dip buyers ended up richly rewarded by the end of the year. That said, I personally don’t think most of the earliest dip buyers are the ones who ended up selling the top on December 29th.
If stocks open where futures suggest they will we’ll be at the high end of clearly defined range running from 2,000 to 2,050. You don’t have to trade it, in fact most of you shouldn’t. Just know that big money traders are watching those numbers and how they trade off it will impact your portfolio.