The aftermath of the French election saw a rush back into “risk-on” assets globally, as investors removed their hedges against the “doomsday-scenario” in Europe. The projected victory of Macron, the Centrist candidate, caused a huge sigh of relief, as the anti-EU forces seem to be losing. The rosy earnings reports of the week also gave a boost to the major indices, although the Nasdaq out-performed the broader market by a mile, thanks to the blowout numbers posted by the likes of Amazon (AMZN), Alphabet (GOOG), and Microsoft (MSFT). The “greatest tax cut in history” is finally beginning to take shape, and although the released plan was mostly in-line with expectations, the market seems to be somewhat disappointed by it.

Stocks finished the week on a negative note after the tax-reform announcement, although the negative economic surprises definitely added to the downward pressure. The CB Consumer Confidence Index, the Durable Goods report, and most importantly, the advance GDP growth reading all missed the consensus estimates by a wide margin. The strong rebound in new home sales was also slightly muted by a larger-than-expected drop in pending home sales, and new jobless claims jumped unexpectedly to 257,000 as well. With the Federal Reserve having its scheduled meeting next week, the Gorilla cannot wait to hear what Janet Yellen & Co. have to say about the recent deterioration in the key indicators.

The technical picture is as bullish as it gets following the strong rally last week, as the major benchmarks all left their short- and long-term moving averages behind. The Nasdaq surged above the 6000 level for the first time in history, while the S&P 500 and the Dow got stopped by the technical “resistance levels” near their prior highs. The Russell 2000 also hit a new all-time high before turning sharply lower on Friday, as small caps might be ready to lead the market once again. The benchmark remained above its 50-day moving average at the end of week, and its 200-day average is still comfortably below the current levels. The Volatility Index (VIX) collapsed on Monday, as investors concluded the European political crisis is “fixed,” and it finished the week near 11, just a hair above its multi-year lows.

Market internals remained generally positive, despite the warning signs in some of the key measures. The Advance/Decline line continues to show a positive divergence as it keeps posting new all-time highs, with advancing issues outnumbering declining stocks once again; by a 4 -to-1 ratio on the NYSE and by a 6-to-1 ratio on the Nasdaq. The average number of new 52-week highs jumped higher on both exchanges, surging to 252 on the NYSE, and 246 on the Nasdaq. The number of new lows remained stable in the meantime, edging dropping to 19 on the NYSE, and 41 on the Nasdaq. The ratio of stocks above their 200-day moving average is a cause for concerns for bulls, as it dipped below 70% on Friday and finished unchanged at 69%, despite the relative strength in small caps.

Short interest followed the VIX significantly lower on Wall Street, hitting a new decade-long low, as bears have one less reason to be optimistic, with the chances of a “Frexit” vote now nearing zero. Software provider VMware (VMW) broke out to a new 3-year high, despite a short interest of 46%, and the stock is now up by 20% this year. Evolent Health (EVH) has also risen 50% so far in 2017, and it continues to creep higher, while the short interest in the company is still alarmingly high at 44%. Verisign (VRSN) hit yet another new high after its earnings beat, and it remains on the top of the list with the highest days-to-cover ratio (DTC), with a reading of 15. Teradata (TDC) is still also high on the list, with a DTC ratio of 13, as the stock took a 10% hit following its quarterly report.

Another week with a busy schedule is coming up on Wall Street, as all eyes are on the Fed once again, with the FOMC deciding on the base interest rate on Wednesday. A rate hike at this meeting would be a huge surprise, especially following the negative economic numbers, but the monetary statement could easily cause turmoil if the committee changes its rhetoric. The non-farm payroll number is expected to bounce back after last month’s disappointing number, and hourly earnings will also be under scrutiny on Job’s Friday. Besides that, the ISM manufacturing and non-manufacturing PMI will be in focus on Monday and Wednesday respectively. Apple (AAPL) and Facebook (FB) will report earnings next week, as well as healthcare giants Pfizer (PFE) and Merck (MRK), so stay tuned for a possibly crazy week!