April is typically the month that traders decide to sell off for the slow summer months, but instead major U.S. stock indexes are reaching multi-year highs. The closing bell on Friday indicated the all three major U.S. Indexes considerably higher for the year, and with strong corporate earnings and encouragement from the Federal Reserve, the gains seemed poised to keep coming.
Analysts have been taking note of indications that the market is currently overbought, but for the most part there seems to be a tone of optimism as evidenced by week-long gains. The S&P shattering the 1,340 range is seen as a positive sign, with many analysts expecting the index to be in the clear until its next ceiling, around the 1,400 level.
Next week, the earnings will wane and the focus will move more toward economic data. During trading last week, negative economic data, namely a weak 1.8 percent growth rate, was all but ignored as a considerable percentage of major companies produced earnings reports that surpassed Wall Street expectations. Without that distraction investors will be more willing to scrutinize the information they are seeing, specifically job data. If the job data is more negative than expected other factors, like the over buying may become an issue. If the job data is good, the optimism over the already high markets may continue to grow despite the seasonal handicap.
Besides the market data, another potential challenge is that Nasdaq benchmark rebalancing, which threw a number of major companies for a loop when it was first announced. Among the companies that may be affected by this is Apple Inc. (NASDAQ: AAPL). Like jobs data; the impact depends on a few variables. Apple recently released an earnings report exhibiting the enormous strength of its sales, which may be enough to quell knee-jerk sell offs.
Trying to assess the attitudes on Wall Street is always tricky but among the best available indicators is the CBOE Volatility Index which as of this week was fairly low, a good sign that these gains may be here to stay against seasonal odds.