Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
I’d feel a lot more comfortable with the FTD day, the individual stock action and general bullish consensus if U.S. bonds would sell off and crude oil would rally. Most of the global growth stocks that rallied sharply yesterday (most likely taking out short sellers as they advanced over key technical levels) have fallen hard today – see Caterpillar (CAT) for an example. As important, crude oil simply cannot rally. I am using the USO ETF rather than the Crude chart simply because it updates intraday. But we’re facing $80 oil. While positive for the consumer, we want strong oil to signify global rebound/strength.
As for Ben, the world is viewing the comments a lot more dovish than I did. Lower growth and lower inflation – usually should be very bad things, but not in this era when they are viewed as “positives”. In the news conference he repeated the same comments he always does – they stand prepared to provide more accomodation, blah blah. Ironically Jackson Hole, Wyoming may come back in play again this year as it did in 2010 when QE1 caused a massive rally. As I wrote many times the Operation Twist extension was sort of a no brainer because if they removed it, it would be a “tightening”.
I believe eyes continue to look to Europe for new actions – a banking union of some sorts might be announced at end of month and now there is talk circulating that Merkel may bow to the idea of the ESM/ESFS rescue funds (or one or the other) buying sovereign debt outright. All this is simply moving debt from the private actors to the public – no different than what we did here in the U.S.
As for this pullback, much needed even if you are a bull. Best case would be for sideways, slight pullback (10-20 S&P points) in the next few days. If we begin to see a much stronger pullback into the 1320s or lower, than this FTD will begin to come into question again.
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