I offered in December that a window of upside opportunity existed where we could see the stock market lift 8% to 10% as we entered the new year. As of Thursday, the S&P had rallied 8% as Europe improved on the margin and fund managers were caught off-guard and under-invested.
Now, the fun starts. With the earnings season upon us, we'll get the 411 from corporate America as they share their fare for all who care. As equities are a forward-looking discounting mechanism, the fundamental data points will have to sufficiently impress investors, or stocks will once again face their wrath.
A few points of parliamentary procedure as we ready for the earnings avalanche:
-- Overbought conditions can be alleviated through time or price, and the longer the market holds tight, the more viable an upside resolution becomes - perhaps one big enough to push the S&P to 1,360 points (another 5%).
-- The bears will say that the path of maximum frustration dictates a semblance of directional comfort before markets reverse, and we're approaching that mindset now.
-- The bulls will argue that as long as Europe doesn't implode, the market will work higher as that risk is removed from the forward equation.
-- Given the run into earnings, the door is open for those looking to sell the news. Insofar as that's likely, in my view, I plan on managing risk accordingly, as shared in real-time each day on Minyanville.com.
To be sure, financial markets have been hazardous for a long time. In fact, last decade was the single worst 10-year stretch ever. Investors, once bitten and twice shy, are past the point of genteel apathy; they're pissed, and social mood continues to deteriorate with each passing day.
There is, however, a brighter side to our current ride, and that's the notion that in order to get through this, we have to go through it - and we're going through it now. I won't sugarcoat the situation: It's nasty out there. But the greatest opportunities are born of the most profound obstacles, and generational opportunities will present themselves for those who proactively prepare.
Todd Harrison is the author of "The Other Side of Wall Street" and the founder and CEO of Minyanville, an Emmy Award-winning financial media platform. Read him daily at www.minyanville.com.