Some of our readers might remember an old black and white TV commercial about a Timex watch in which the manufacturer attached the timepiece to a motorboat engine blade; shot it at a wall using a bow and arrow, and dropped it in a washing machine, among other tests of resilience. In the commercials, at least, it always passed with flying colors: “It takes a licking but keeps on ticking.”

That pretty well describes the U.S. stock market. The S&P 500 index (SPX) had every reason to break to downside in the past month, as the looming litany of bearish arguments grew larger seemingly by the week—the inverted yield curve; the U.S. Treasury 10-yr note yield below 1.5%; the ISM falling below 50 (which suggests contraction); the VIX (fear index) surging, and President Donald Trumps “threats” to close the Federal Reserve Board.

Instead, we are witnessing an upside breakout of S&P 500 from the August range (2,820-2,940). From conversations with clients in the past few days, it seems investors remain largely skeptical of the rally, mainly because so many spent the past few weeks getting defensive in positioning and now don’t want to be whipsawed again.

The S&P 500 finally broke out of its August range on the heels of de-escalation of U.S.China trade/tariff ...

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