US stocks cheer bad news as good news

The Dow industrial average is now up over 10% as well from its October 13 low.

The S&P index is up around 9.8%. For the S&P index, it is now above its 38.2% retracement of the move down from the August 16 high. That level comes in at 3810.05. It also moved above the October 5 high at 3806.91. The price moved above its 200 hour moving average back on Friday. The last time the price traded above its 200 hour moving average was back on August 26 (see green line in the chart below).

Meanwhile on CNBC Coca-Cola’s CEO was on talking about increased earnings expectations going forward. Despite the headwinds from the US dollar and higher costs, the company announce better earnings and revenues as they raised prices and “leaned into” the demand despite the price increases.

The comments suggest the consumers are still happy to spend even at higher prices which may be a concern for inflation and inflation expectations for the Fed going forward.

Next week’s comments from the Fed chair are once again key. The market is looking for a pivot. Will the Fed start to talk about demand destruction and lower inflation going forward? That discussion might be premature which could put a limit on equity gains.

For now however, the technicals are more positive.. It would take move back below the 200 hour moving averages to ruin the corrective party for traders looking for more upside.