The major averages rallied for a third straight week helping small-cap Russell 2000 hit a new all-time high and the DJIA & SPX enjoy new record high closes. The strong bull market that we are experiencing continues to be driven by easy money policies from global central banks. After a brief 7% pullback that lasted 7-weeks the major averages are now flirting ith new highs after Bernanke did a 180 and said easy money policies are here to stay for the foreseeable future. Remember, the US Fed continues to print $4B/day and other central banks around the world are showing no signs of backing off which has been the single largest catalysts for this very strong bull market.

Stocks rallied on Monday helping the major averages move further above their respective 50 DMA Lines. Economic data was relatively light. The Federal Reserve said consumer credit grew in May by $19.6 billion to $2.8 trillion, topping estimates for a $12.5 billion gain. This was the largest increase in a year which bodes well for the economy. Underneath the surface a ton of leading stocks broke out of sound bases which bodes well for the market. After the close Aloca (AA) officially kicked off Q2 earnings season. In addition to analyzing the data it is very important to see how the stock and the market react to the numbers.
Stocks opened higher on Tuesday as investors digested the latest round of earnings and economic data from across the globe. Overnight, inflation rose in China which bodes well for the global economy. China’s CPI rose 2.7% in June from a year ago, topping estimates for a gain of 2.5%. Elsewhere, the IMF cut its 2013 and 2014 outlook for the global economy. 2013’s estimate was lowered to 3.1%, from 3.3% in April and 2014’s outlook was cut to 3.8% from 4%. Italy’s debt was downgraded by S&P. Italy is now rated two notches above “junk” status. In the U.S., small business optimism slid from a one year high in June.
Stocks ended higher on Wednesday after the latest round of earnings and economic data were released. Overnight, China said June exports slid -3.1% year over year in June which missed the Street’s estimate for a gain of +3.7%.  In the U.S., wholesale inventories fell by -0.5% in May, missing estimates for a gain of 0.3%. This was the largest decline in almost two years. Weekly mortgage applications fell last week after interest rates surged. The Fed released the minutes of their June meeting which showed they are open to tapering QE. The big news of the week came after the close when Bernanke spoke at the National Bureau of Economic Research conference. Bernanke did a 180 and completely reversed earlier taper talk and said accommodative monetary policy could continue for the foreseeable future. Almost instantly, markets reversed course (stocks rallied and the greenback fell) on hopes of continued stimulus from the Fed. His topic was “The First 100 Years: A Century of U.S. Central Banking: Goals; Frameworks, Accountability.”

Thursday & Friday’s Action: Bernanke Does A 180; Stocks Soar

U.S. stocks soared on Thursday after Bernanke’s 180, helping the S&P 500 and DJIA enjoy record high closes. The Latest data from Reuters showed that analysts expect S&P 500 earnings to have grown by 2.6% in Q2 from the same period in 2012. They expect revenue to have increased by 1.5% vs Q2 2012. Separately, the Labor Department said weekly jobless claims rose by 16,000 last week to a seasonally adjusted 360,000 which topped expectations for a reading of 340,000. Another report showed import and export prices slid for the fourth-straight month in June. Before Friday’s open, the Labor Department said producer prices rose 0.8% in June, topping estimates for a gain of 0.5%. The preliminary reading for consumer confidence missed estimates and slid in July.

MARKET OUTLOOK: Stocks Hit All-Time Highs

The Fed induced rally is alive and well after Bernanke did a 180 and shifted the narrative back to a world of infinite Fed money. Our goal is to remain in sync with the broader trend of the market (up or down) and not get caught up with the minutiae of changing labels on the market status very often. As always, keep your losses small and never argue with the tape.

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