If we get an agreement gets done this weekend in Islamabad, the markets will celebrate.
S&P 500
The S&P 500 tried to rally early during the trading session on Friday but gave back some of those gains. Quite frankly, that is not a huge surprise to me. We had gotten a little bit ahead of ourselves anyway. And now we are sitting above the 6800-level drifting into the weekend trying to figure out what to do. I think at this point in time, a pullback is more likely than not, but this is all driven by the peace talks in Islamabad.
If we get a concrete decision and an agreement that everybody can live by, then the S&P 500 will probably continue higher. If there is any concerns whatsoever, the S&P 500 should start falling again. You will see on the chart that there is the 10-year yield; it is currently at 4.317%. Anything above 4.3% seems to be a little bit of a problem for the stock market, so we will have to see.
Market Correlations and Weekend Volatility
Mainly what you are paying attention to is the direction of interest rates. That will give you a general idea of how stocks might move; it is a common correlation a lot of traders use. If we get a lot of bad news over the weekend, then I suspect rates probably go back up and stocks go back down.
They are overstretched anyway, so I think you could make an argument that perhaps they need to take a bit of a breather and find some value regardless. That is probably true, but there will be an outsized move right at the open would be my guess if there is any type of resolution, be it good or bad over the weekend, allowing a gap and then some type of bigger move either higher or lower. To the upside, if we do get a lot of positive news, I think we will start testing 7000 again as it had been so important for a couple of months previously.