THE BIG OPEN

Markets up over 1% because the prez says deal talks going “very well!” But he has used those words 100 times in the past 18 months. The difference? Elections matter and we are getting closer.

But add in:

We are calling it “QE BUT DON’T CALL IT QE!” At least, that’s what the easy money, data dependent Powell is trying to con you with. To be clear, our Fed, with unemployment at 3.5%, is again buying up bonds with funny money. This has helped markets for 10 years, so why shouldn’t it help one more time? By the way, that is the definition of QE. Just remember what we have told you about the past year of easier money. Back last December, markets were being trashed. Mnuchin gets on a call with Powell and others. Christmas eve…yes, Christmas eve, they leaked out that the Fed would change their stance from “raising rates” to “patience!” Markets took the cue and bottomed the day after Christmas. A few days later, Powell confirmed the leak. The market rallied into the end of April. Uh oh., Markets then swooned a whopping 6-10%. Just 6-10% got the Fed on the move again. Powell sent his mouthpiece Bullard out to “leak” another change of stance from “patience” to “lowering of rates!” Markets bottomed immediately. Powell confirmed it later on with the a new round of rate cuts. So here we go again. Easier money is coming. This has been the steroids markets have loved. Do not forget, it is much easier around the globe with negative rates in many areas. Greece was even able to float bonds with negative rates. GREECE!
So a small deal combined with easier money. What else could markets ask for?
With this morning’s open, most major indices will be trading where they were last week, 2 weeks ago, a month ago, 2 months ago, 4 months ago, 6 months ago, a year ago. Areas like the Russell 2000 and the Transports would be trading where they were 2 years ago. So before you get all excited, just remember where the markets are and what they have been doing. But we have some good news. Throughout all this trade bluster, the big 4 indices, at their worst, went through a nasty correction int the 4th quarter of last year (more on that later) and are currently just a couple percent below their highs. On top of that, the all-important SEMICONDUCTORS continue to show amazing relative strength. But for the market to really get going, we are going to have to see the internals improve. We are all for it. But let’s see it happen.
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