Summertime, and the Rally Is Raging

It’s summertime and the living is easy
Fish are jumping and the cotton is high
Your daddy’s rich and your mama’s good-looking
Hush, little baby don’t you cry

–Sam Cooke, "Summertime"

I live in Southern California, and out here you definitely can tell that summer has arrived. The heat’s been raging here for the past couple of days, and so has the heat on Wall Street. During the past two trading sessions, the market has been red hot. I think we could be seeing the start of the highly anticipated summer rally.

Look at the following chart of the S&P 500 Index, and you can see that we’ve bounced off both the 50-day moving average (blue line), as well as the 200-day moving average (red line).

From a technical perspective, the move above 920 is a very strong signal that we could be headed above the coveted 950 mark relatively soon.

Some of the catalysts for Wall Street’s buying spree have been strong earnings from bellwether firms, such as Goldman Sachs (GS) and Intel (INTC). Both companies blew through consensus Street estimates for the second quarter, and that augurs well for stocks, not only in the financial and tech sectors, but also across the board.

And while I think it is a bit premature to say that the rally now is firmly in place and that Wall Street isn’t going to look back again, I don’t think it’s premature to say that this rally could be the start of a very nice move to the upside.