S&P 500 has nearly erased year-to-date loss
Here were the reasons stocks sold off to start the year:
1) Worry about commodities, commodity exporters and commodity companies
Oil and other resources were absolutely punished to start the year. WTI crude fell to $26 from $37. Now, crude is higher on the year. Gold and copper are also up so far in 2016. Oversupply is still a major problem but for now, resource prices aren't pointing to the kinds of massive waves of defaults that could roil the financial sector.
2) Fear about the global economy
One of the big worries at the start of the year was China. The haphazard policy changes and U-turns from Chinese officials didn't inspire any confidence. Many of those questions remain but the PBOC cut rates and officials reopened the lending taps. There will be hell to pay one day but for now there are no signs of a hard landing.
3) The US economy is fine
At the height of the market worries, economists were talking about a 50% chance of a US recession this year. There just isn't any way to justify that kind of fear with the economic data. I'll be the first to argue that the US economy is mediocre and that 3% growth is nowhere on the horizon but 1.5%-2.0% is still safely out of recessionary territory. Some unforeseen crisis is always possible but you need to trade the data in front of you and there's nothing to suggest the US won't muddle along.
How high can the S&P 500 go?
Technically, there is the double bottom just above 1800 and the measure target points to something around 2080. That's 40-45 points above the current levels. There's a minor downtrend to contend with and a December high that came on very light volume. For me, the 2100 level and the Dec high of 2104 are the levels to watch.