As we've discussed in my notes, stocks have broken above this big descending trendline that represents the bear market of last year – also above the 200-day moving average. The next big technical level to watch is 4200. That's only 1% away.
Meanwhile, we're just coming to the end of Q1 earnings season, which was expected to be the worst quarter of the year for corporate America, with a recovery in earnings growth expected to come in the second half.
But the Q1 reports have been full of positive surprises. As of last Friday, 85% of companies had reported, with above average earnings beats (79%). And the earnings contraction, at that point, was just 2.2%, versus expectations coming into the earnings season of 6.7%.
And this also comes as the institutional investment community is positioned in a very bearish stance (twenty-year extreme short positions from the leveraged futures traders, and global fund managers most bearish stocks, relative to bonds, since 2009). As we've discussed, these are contrarian indicators.
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