None of our themes have changed.
The breakout of the 18 month trading range in the Dow and S&P was nothing but bullish. We said that based on precedent. Whenever a couple of major indices break out of long ranges, it usually works for a while. But there was something else that was also very bullish and that was the 11 percent cash in mutual funds and pension funds. A breakout combined with that kind of ammo is a great one-two punch. Just remember, as markets go higher, managers that have too much cash feel the breathing down their necks…thus things tend to feed on themselves.
Another one of our themes confounds the masses and that is that earnings and sales growth continues to stink. Economies here and around the globe remain subpar at best. Debt and deficits continue to explode upwards. Normally this would be a problem for markets but there are other forces at work. We continue to expect a day of reckoning but have no idea on what day or from what price it starts.
Lastly, we continue to believe this market move is the result of another ramping up and is a continuation of the huge, gargantuan, humongous, monolithic and unfathomable easy money policies by just about every player around the globe. We have highlighted for you the 0% rates, the printing of (depending on what abacus you are using) over $20 trillion and counting, negative rates and the outright buying up of markets by central banks. We could have never predicted how far these maniacs would raise the bar or should we say lower the bar when it comes to manipulating and rigging of markets. They will never be able to roll this back. They wouldn’t even dare. Since the low of February, we have seen lower negative rates, more printing of money, more buying up of markets and that is just what they tell us. By our count, the globe is printing more than $250 billion/month in order to keep markets and economies afloat.
Feels like gold/silver are on pause. After a good move up, this is normal. We actually saw some names breaking the 50 day for the first time in a while.
Semis remain en fuego as there seems to be a buyout every week.
Financials still lag but are set up here to move higher. One good day takes them out of range. If that occurs, another point for the market.
Defensive areas are no longer leading as reits and utilities act poorly. Also seeing some suspect action in consumer staples though some names look just fine.
Indices have been very tight over the past couple weeks. A good day takes them topside but a bad day takes them in pullback mode.
Lastly, for the first time in a couple years, beta is picking up. We are also seeing some strong action in recent IPOs. This is good news. We read others saying this is not good for markets…disagree.