That monster session on Friday had heads scratching or buzzing over the weekend. Bears are still smarting about the reaction to the jobs report while the shorts are licking their wounds. I understand shorts like to go out on their shield, and that’s what’s happening. But it’s time to rethink things when the market reacts oppositely to what they have predicted.

They always find fresh cash after limping to the sidelines, but for now, a short squeeze would provide a nice boost to a market pulling away from Earth’s gravitational pull. Perhaps the most impressive part of Friday’s session is the monster performance without leadership from Mega- cap names.

Materials Pave the Way

On Friday, DuPont (ticker: DD), Chemours (CC), and Corteva (CTVA) announced a settlement with water providers across much of the U.S. The three will contribute about $1.2 billion to a settlement fund. That money can be used to monitor and clean up PFAS. (The three companies are involved because they were once part of a larger DuPont.)

It cost them $1.2 billion, but Dupont and MMM can put to bed a legal cloud hovering for years. It remains to be seen if buyers will continue to pile into these names. Likewise, it remains to be seen if the equal-weight S&P 500 will pick up on Friday.

The Invesco S&P 500 Equal Weight ETF (RSP) surged on monster volume. That’s what we call conviction. However, there are pockets of resistance before we see the kind of breakout that must be chased even by the naysayers.

Make No Mistake, it’s always good when mega-caps are in the parade, even when others are leading.

Houston, we have lift off. That’s how you clear a hurdle that has become a legendary technical nemesis. The S&P 500 closed above 4,200 in convincing fashion.

Powell’s Predicament

I’m not sure this is where the Federal Reserve thought the stock market would be almost 27 months after the most aggressive rate-hiking cycle in history. But, on the other hand, I suspect they would have thought it would be much lower initially, as the S&P 500 saw a 17% decline in total return.

Talk about a round trip. As of the close on Friday, the S&P 500 total return is flat, which is a monumental victory for the market – I think?  Of course, I’m being somewhat tongue-in-cheek because a lot of angry folks are lining up to scream about why this market is all wrong.

As for Powell

Powell has hinted at fewer jobs lost in this tightening cycle than the historic norm. If he pulls it off, it would be the mother of all soft landings and a lot cooler than being Volcker 2.0.

Haters Are Going to Hate

Hedged funds have never been this short on the stock market. There are a few factors, including hedging, but let’s face it, -these brilliant masters of the universe never liked this rally and bet big on a major crash this year.

It’s indeed a wonderful life when you’re so wrong that you can be down billions, and still fuel up your yacht.

Portfolio Approach

We closed a position in our Hotline Model Portfolio in Communication Services this morning.

Today’s Session

It’s a light day on news, but it could be a big day for markets as recent gains could be:

1. Extended
2. Consolidated
3. Sold for profit-taking

If it’s extended, there will be a furious pace to catch up resulting in a so-called ‘melt-up, which invites aggressive shorts.

If it’s consolidation, then it’s a chance to shake out weaker hands.  I’m cool with this option.

If we see profit-taking, then it could mean S&P 500 goes back to 3,900-3,800 again.  The selling would have to be on high volume and takeout 4,200.

Meanwhile, conferences will move stocks much like earnings and guidance announcements.

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