Stocks Surge on Hopes Of More QE

Byinfo@50park.com

SPXSTOCK MARKET COMMENTARY:
FRIDAY, SEPTEMBER 20, 2013

Allow us to be clear, the market is strong. The latest pullback was shallow in both size (% decline) and scope (weeks, not months). The primary catalyst behind this 4.5 year bull market remains easy money from global central banks. We just found out that the easy money is here to stay (for now).  Eventually the music will end, but as a market practitioner, our only job is to align ourselves with what is actually happening, not what someone thinks will happen. That said weakness should be bought until further notice. Finally, a few steps have been taken by Congress to help prevent a government shutdown. That debate will be interesting as both sides of the aisle prepare to embarrass themselves…again.

Get Powerful Ideas
Delivered To Your Inbox

MONDAY-WEDNESDAY’S ACTION: Stocks Surge On Hopes of More QE

Stocks rallied sharply on Monday after Larry Summers dropped out of the race to replace Bernanke. The underlying notion which helped stocks rally was that Janet Yellen is now seen as the front runner and she is in favor of more QE, not less. Separately, options trading was temporarily suspended after a data glitch was reported at one of the exchanges. Shares of Apple (AAPL) were smacked after the company broke tradition and failed to report pre-order figures for their new products. Economic data was not ideal. New York State’s manufacturing index unexpectedly slowed in September. The New York Fed’s “Empire State” index fell to 6.29 from 8.24 in August, missing the 9.20 forecast. A separate report showed that industrial production matched estimates and rose 0.4% in August after being flat in July.

Stocks edged higher on Tuesday after the latest round of economic data was announced. Home builder sentiment remained unchanged at 58 in September which missed estimates for 59. The consumer price index (CPI) rose by 0.1% in August which missed estimates for a gain of 0.2%. In other news, the Fed started their much anticipated 2-day meeting.
Stocks soared on Wednesday after the Federal Reserve surprised the Street when they decided not to taper QE. Most people on the Street were expecting the Fed to taper between 5-15B but that didn’t happen. Instead, they decided to keep the pedal to the metal and stocks soared on the news. In fact, twenty minutes before the Fed meeting, the White House “leaked” news that Yellen was indeed the front runner to replace Bernanke in January. Markets rallied on the news, then soared after the Fed meeting. Yellen is believed to be a dove which means she wants more QE, not less. So many now believe this was Bernanke indirectly handing off power to Yellen.

THURSDAY & FRIDAY’S ACTION: STOCKS DIGEST THE RECENT MOVE

Stocks were quiet on Thursday as investors digested Wednesday’s strong rally. Economic data was mostly positive. The Philly Fed index jumped to 22.3 which was the highest level in over two years and easily beat expectations for a reading of 10. The National Association of Realtors said existing home sales surged 1.7% to a 6.5 year high of 5.48M units, easily beating estimates for 5.25M. Weekly jobless claims rose by 15k to 309k but the reading was distorted as two states were still working through a backlog of unprocessed claims from last week. Finally, leading economic indicators topped estimates and rose nicely in August. Stocks fell on Friday as the enthusiasm waned regarding valuations and future QE.

MARKET OUTLOOK: Bulls Are In Control

The market looks very strong as this bull market is alive and well. The latest pullback was short in both size and scope which bodes well for this market. Please note that 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.


 

Similar Posts

  • Stocks In The Red For Q2 & 2010

    Byinfo@50park.com

    Wednesday, June 28, 2010 Stock Market Commentary: The major averages ended lower on the final day of the second quarter as European debt woes threatened the global economic recovery. The widespread losses coupled with the ominous technical damage effectively ended the latest confirmed rally which began with the June 15, 2010 follow-through day (FTD). Wednesday’s…

  • Stocks Rally As Dollar Falls

    Byinfo@50park.com

    Market Action- Market In Confirmed Rally; Week 22
    It was encouraging to see the bulls show up in November and defend the major averages’ respective 50 DMA lines. The market remains in a confirmed rally until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. However, it is important to note that stocks are a bit extended here and a pullback of some sort (back to the 50 DMA lines) would do wonders to restore the health of this bull market. If you are looking for specific high ranked ideas, please contact us for more information.

  • 2nd Quarter & QE2 End, Finally!

    Byinfo@50park.com

    Market Outlook- Market In A Correction:
    The market is back in a correction after another failed follow-through day on Tuesday, June 21, 2011. Now that we are back in a correction, defense remains the best offense. The next level of support for the major averages is their respective 200 DMA lines and then their March lows. The next level of resistance for the major averages is their respective 50 DMA lines. Trade accordingly.
    For those of you that are interested, the S&P 500 hit a new 2011 high on May 2, 2011. Two days later, on Wednesday, May 4, 2011, we turned cautious and said “The Rally Was Under Pressure” (read here). Then on Monday, 5.23.11, we changed our outlook to “Market In A Correction” (read here). On Monday, June 6, 2011 we pointed out that the S&P 500 violated its 9-month upward trendline (read here) and reiterated our cautious stance. On June 21, 2011 we changed our Market Outlook to a “Confirmed Rally” after the latest FTD was produced. Two days later, on Thursday, June 23, 2011, our outlook changed to “Market In A Correction”after the market sold off hard on renewed economic woes. If you are looking for specific help navigating this market, please contact us for more information.
    Stock Market Research?
    Global Macro Research?
    Want To Follow Trends?
    Learn How We Can Help You!

  • Stocks Edge Higher Ahead Of Jobs Report

    Byinfo@50park.com

    Looking forward, the window is now open for disciplined investors to begin carefully buying high-ranked stocks again. It was encouraging to see a flurry of high-ranked leaders trigger fresh technical buy signals and break out of sound bases. The next important level to watch for the major averages are their respective 200-day moving average (DMA) lines. It is important to note that approximately 75% of FTDs lead to new sustained rallies, while 25% fail. In addition, every major rally in market history has begun with a FTD, but not every FTD leads to a new rally. Trade accordingly.