Is The Market Finally Coupling To Economic Relaity?

Let's start by reminding ourselves that price making a weekly close above SPX 2130 means all conversations about recent volatility are moot since the overall market uptrend will have resumed, to which only an unforeseen economic event or financial collapse will reverse. Meaning, if you are a detached buy and hold investor needing access to retirement income, because the government has killed savings and savers and made us all market speculators, relax. Fundamentally nothing has changed in the fictitious Kenseynian universe of debt stimulus, weak USD, and appreciating risk assets.

What is worth looking at, in my opinion, is market weakness that has prevailed since 20 April, why it has occurred, persisted, and whether it will continue.

SPX Weekly Chart

The first issue, why is has occurred, is simple. There were more sellers at SPX 2111 than buyers. Why the sell off persisted for over two trading weeks is due to the fact that there were enough institutional sellers who have not accepted the not-so-new normal that stock market and economic performance are completely detached from one another.

Addressing the last issue, of whether the market will break into new highs or continue to sell, I am optimistic it will break out in coming weeks and my reasoning, looking at inverse correlating indicators, is as follows.

1. No volatility: 

VIX Daily Chart

2. Low interest rates:

US Ten Year Monthly Chart

3. Rising Commodity Prices:

OIL Weekly Chart

4. The spoiler that's not likely to spoil anything:

DXY Monthly Chart

So, to answer the headline question, no I do not believe the market has coupled to economic reality and likely will not until something cataclysmic and completely unforeseen occurs to realign our Keynesian science fiction universe with financial reality. 

Happy Trading!