The market has experienced the worst January and the best recovery of its history during Q1. Volatility and uncertainty has increased no matter what the Index shows. VIX closed at 14 in March. Fed’s QE has caused high prices without creating a real wealth effect: of course this wealth creation was not transferred to the real economy. Real economic data together with the appreciation of the dollar is a risk that brought the market to consider the recession.
As anticipated, the SP500 has turn positive YTD with little footprint from large capital. The correlation with oil has decreased and the dollar remains bearish range helping American companies to export cheaper. I conclude that the Fed will not allow the market to be over-bought or over-sold until more data its available and analyzed. How much longer will the Fed support the markets?
The market gain 14.6% in 51 days, now it’s likely that we trade lower before the a consolidation at a lower level. Bears have an attractive risk/reward trade below 2075 in the SPX. Remember that nobody can forecast with high certainty future prices of the stock market.