It’s show-me time for the bulls.
The S&P 500 (^GSPC) has been stuck in a relatively tight trading range for months, however stocks look as if they’re about to challenge key levels. What now?
Mike Murphy, founder and CEO of Rosecliff Capital thinks a break out is inevitable.
“One of the reasons is interest rates,” he said. “Of course everyone knows that the 10-year is under 2%, that gets a lot of headlines, but German bonds are about to flatline too,” he said, meaning that bonds issued by two of the world’s largest nation’s don’t offer any kind of meaningful competition to stocks.
Also Murphy cited gains in China’s stock market and Germany’s stock market as other bullish catalysts for the S&P; he believes professional investors will lock in those gains and rotate money elsewhere.
And he said from a technical perspective trendlines and patterns suggest the market wants to break out, too.
On top of all that “There’s an issue of supply and demand,” Murphy added. “There are so many buybacks underway. A total of $1 trillion is expected to go into buybacks. That means there will be less stock for buyers to purchase.”
“When you look at all those catalysts I think the next move has got to be to the upside,” Murphy said.
And in the event the market sells off, Murphy said he’s a buyer. “For several years a pullback has been a buying opportunity. On the dips, history tells me to put money to work. Pros know that and if you look at dips, they’ve become smaller and smaller because when the come, money goes in there.”