The French elections are over and the pro EU candidate won but the market choked.

Emmanuel Macron won the presidential runoff in France and that was the market's favorite candidate. However, after spiking sharply higher on the news with a +5 point gain, the S&P futures reversed almost immediately to trade down -4 points around 9:PM ET. The Euro currency initially spiked and then faded as well. Analysts now claim the Macron win was already priced into the market given his 20% advantage going into the vote.

There is a lot of darkness before morning and anything can happen. The U.S. markets closed at their recent highs on Friday in what appeared to be positive expectations for a Macron win and a market rally next week. If investors wake up on Monday to a sell the news event, it may not be pretty.

However, the right candidate won in France and that removes any negative expectations for U.S. investors. We could chalk up the overnight volatility in the thinly traded futures market as short-term trader panic as they unwind any futures positions they were holding at Friday's close.

The economic calendar is lacking any market moving reports for next week. Any report can always become a market mover if the numbers come in dramatically different than expected but that is not going to be the case next week. The Retail Sales and the Price Indexes are the most important but the NFIB opinion survey will still be of interest.

The earnings calendar has 42 S&P stocks and one Dow stock reporting next week. Nvidia, Priceline, Tripadvisor and Disney will be the focus on Tuesday and SnapChat's first public earnings report on Wednesday will probably capture the majority of attention.

The S&P closed at a new high on Friday and just a fraction under round number resistance at 2,400. ANY further gains from here could trigger significant short covering and price chasing as investors chase stocks to avoid being left behind. The negative futures tonight present an interesting problem. If we had a repeat of the post election short squeeze two weeks ago, the S&P could have blown through that last bit of resistance and started a new leg higher. With the futures negative, that puts the resistance back into play and could derail any bullish stampede previously planned for Monday.

The Dow chart is similar. The index closed just fractionally over the 21,000 level as late day traders bought big caps in anticipation of a Macron win. If that anticipation turns into a sell the news event, the Dow would have to face that support test once again before charging higher. The index is still at resistance despite the 6-point close. The Dow moving higher is not a guaranteed event although it does look likely.

The Nasdaq Composite is both encouraging and troubling at the same time. I am encouraged that the mid week decline was minor and that the index closed over 6,100 on Friday. I am troubled that most of the large cap tech stocks are very over extended and it is hard for me to believe they will simply continue to make higher highs for weeks into the future.

The earnings cycle is slowing and we are headed into the sell in May period. Without additional catalysts will the Nasdaq become even more overextended?

The small cap indexes were lagging last week as the big cap indexes moved back to their highs. A weak small cap sector normally means the market is at risk. I would love to see the small caps recover and make new highs to support the broader market. There are eight times as many small caps as big cap stocks.

This could be an interesting week as the markets try to find a direction when left on their own without any material headline events. How do people invest without wars, elections, political events and scandals? I have forgotten how that works. Do you think they will focus on the 14.7% earnings growth for Q1 and similar projections for the next three quarters? That would be very refreshing and I would look forward to returning to a "normal" market.

Keep some cash on hand in case a buying opportunity appears.

Jim Brown

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