Stock Market Rally Continues on Positive Feedback Loop

NYSE Traders
Scott Eelis | Bloomberg | Getty Images

Stocks in a positive feedback loop. Another day, another historic high in the Dow Jones Transportation Index, the Russell 2000, and the S&P MidCap Index.

There's no particular reason for stocks to move up. There's just positive momentum, which responds to technicals. You could see it in the action of E-Mini S&P 500 Futures, which popped just prior to 10:00 a.m. ET on word of call buying in the March 1,550 futures. The result: the index broke through to a new multi-year intraday high, right around 1,524 or so.

Here is your feedback loop: stocks are the place to be for the moment, and the U.S. is the best place for stocks.

So what does a "positive feedback loop" look like? It looks like the Vanguard Total Stock Market ETF (VTI) versus the Vanguard Total Bond Market ETF (BND).

Both are the broadest measures of their respective markets. Since November, when the U.S. stock market bottomed, Total Stock Market is up 13 percent, Total Bond Market is down two percent.

And I mean almost every day: Total Stock Market has been up, Total Bond market has been down. The only exception is a few days at the end of November, when Total Bond moved up a few days.

Regardless, this isn't going to go on forever. What could mess up this "positive feedback loop?" Some expected the Wal-Mart (WMT) leak from last week, indicating the low- to mid-income consumer is getting hurt by the new tax rates, might do it. But it isn't. Not yet.



  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

Wall Street

  • George Soros

    Bullish positions in gold and volatility and short bets on China were some of the trades that benefited hedge funds.

  • Traders work on the floor of the New York Stock Exchange.

    Stocks and risk assets could continue to get smacked and currency volatility remain at extreme highs this week as investors weigh the fallout of the U.K. Brexit vote.

  • A man looks at global rates at a currency exchange on June 24, 2016 in New York.

    Brexit has unleashed uncertainty for months and years to come in the foreign exchange markets, says Keith Underwood. Here are the winners and losers.