I think it was a few weeks after QE3 that we started to title our reports “NEVER GOING DOWN AGAIN.” We did this because the monstrous printing of money put a bid…another bid and another bid into the market. It was persistent with hardly any selling.
It almost feels the same. After a topping out process, a top and a mini meltdown, markets have again reacted to a crapload more of QE across the globe. We are amazed how easily fear has turned into greed again…and WITH NO IN-BETWEEN. Usually after a drop of such kind, the market has to earn and work its way back up. In this day of QE, hot money and whatever else, there isn’t any in-between. We have just had the mother of V-shaped moves up with very little selling in sight. Of course, that is unless you own SLXP this morning.
Large caps remains the strongest…mid-caps are just that, in the middle…with small caps continuing to lag like they have for the better part of a year.
Many are saying this cannot continue but those people had better look how 2013′s move off of QE lasted 6 months…the 2012 move lasting 4-5 months…and the 2010-2011 move lasting about 8 months…again…all off of massive money printing announcements. Remember, in the past, just having 0% rates was unheard of. That was considered to be ridiculously easy monetary policy. Now it is the norm.
A few things to start paying attention to:
The dollar has soared as Japan and Europe try to destroy their currencies on purpose. Yes…they think this will work. This has crushed commodities. With one massively overbought and one massively oversold, we suspect last week’s late action has put in a short-term change in trend. This does not change the overall trend…but more of a relief rally.
HOSPITALS have topped. Bounces are to be sold into.
Watch HOUSING as a couple of names are starting to emerge.
WMT and TGT look to be coming out of big bases. That probably augurs well for retail if it continues.
Along with small caps, Europe continues to lag badly. We are the place to be this second.
In case you are Sheldon Cooper, “never going down again” is sarcasm. Overall, markets remain stretched and overbought and are waaaaay due to pull back…but again, doesn’t mean they have to.