Friends
The bears took a double punch to the gut this morning, as the markets got both decent domestic economic news and a bazooka from the ECB. First, we’ll discuss the ECB news. ECB President Mario Draghi announced this morning an “unlimited” government bond buying program in the Eurozone, a measure to ensure the viability of the Euro. This is similar to Dr. Bernanke going all in with QE 1 back in late 2008 and early 2009. Similar to “don’t fight the Fed”, it is difficult to fight central banks around the world. It’s very difficult for the bears to fight “unlimited”. Now, does this actually solve the long term debt problems in Europe? Well, no. It actually piles up more debt, but don’t bother me with the details. The hope actually is that it simply buys time for Europe to begin to grow out of their problems. Will this work in the long run? Well….
On the domestic front we got a better than expected ADP private sector job number this morning coupled with a “not too bad” ISM non-manufacturing report. This sets us up for the non-farm payroll number tomorrow. What was the effect of all this news on the markets? Well, the bears (shorts) panicked and bought (covered their shorts) stocks right from the start. By the close, the Dow Jones Industrial Average was up 244 points to finish the day at13,291. The S&P 500 was up 28 points to close at 1432. Gold was up $10 to trade a $1704 per ounce, while oil was down $.59 (odd that oil was down) to trade at $94.77 per barrel WTI. The S&P 500 closed at a 4 1/2 year high. The NASDAQ closed at a 12 year high!
Today was short covering by panicked bears. Can the bulls actually take the mantel beginning tomorrow and move this market higher with some fresh money? Yes, we closed above that pesky 1426 number on the S&P, but can the bulls advance the ball a little further down the field and start a sustainable rally that will carry us into the fall and past the election? Remember, the first reaction today was from bears leaning the wrong way. To sustain this rally, we need underinvested bulls to throw caution to the wind and buy, buy, buy.
After, a quiet few weeks, we expected action to pick up this week, and it seems we are seeing just that. Let’s see how the employment picture looks tomorrow and what the interpretation is. Will good news (a good jobs report) be good for stocks or would it put the brakes on the Fed and their QE3 plans. You know how it goes- is good news good news, or is good news bad news, or is bad news goods news…
Have a nice evening everyone.
