Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Did some surfing of the financial blogosphere along with quite a few mainstream financial publications yesterday and the social mood has made a massive 180 from where it was even 30 days ago. One thing about markets is the humans left (ex machines) never change. After a stellar January everyone is pointing to the bright skies ahead as Europe is contained, China has accelerated and the U.S. surges to… well 2%-2.5% growth. Heck even bond yields are going up – granted to areas once considered recessionary and would be associated with a calamity. Awesome move right? Almost back to 2% on the 10 year…
Well even in the context of the past 3 years… not so impressive. But this is another bullish thesis – the beginning of “the great rotation” out of bonds and into stocks. For real this time? We won’t know without the benefit of hindsight of course…
But bigger picture when everyone is on the same side of the boat, generally the market rewards them all! Well not so much. Yes technically we are in an impressive breakout on the S&P 500 (and most indexes not named NASDAQ due to Apple), but we’ve begun to disassociate from most supports at this point. Even falling from the top of this channel to the bottom is over 30 S&P points, which in a year that has seen nothing over a 0.3% loss would feel like end of days. There will be a catalyst for at least a minor pullback – we just don’t know what or when. Frankly it could be good news at this point i.e. good news that the market sells off on. Or good news in a positively written paragraph from the Fed that causes the normal lemming reaction (“oh my gosh, they are going to take away our heroin any second now!”) Etc. But until then we continue to dance along the top of this ascending channel and you can see almost every day now we are hitting the top of it. That’s what happens when you start putting 7-8-9 days in a row up.
Earnings continue to roll in, and as usual companies were busy slashing guidance over the past few months and now are beating those lowered guidances. This will be the last week of heavy S&P 500 type of reports and then things move to smaller fare.
It will be a busy week on the economic front. Consumer confidence Tuesday, ADP Employment Wednesday (+172K), Q4 GDP first pass Wednesday (expectations of 1.0%), FOMC Meeting announcement Wednesday afternoon, Chicago PMI Thursday, Monthly Employment Friday (+155K and 7.7% rate) and ISM Mfg Friday (50.7 expected, flat versus last month). Frankly I am a bit surprised that the employment data has not been increased considered back to back weeks of sub 350K weekly claims. Interesting.
CNNMoney has an interesting Fear and Greed index, showing we’re reaching extremes…
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
