HOW OLD MEN WITH BAD BREATH AND CORNY BOW TIES ARE DRIVING THIS RALLY
Yes, we did sell the news. Only it came a day early. Last night I spoke of the fact that the selling we had witnessed on Tuesday had nothing to do with a lack of an agreement out of Europe. Rather it had everything to do with sellers attempting to beat each other to the punch in selling the news.
I saw it again today. There was a general sense of nervousness all day with respect to the rally. It was a very difficult rally to buy. The sell on the news mentality paired with scars of the past few months makes it difficult for fund managers to buy into days like today.
I felt it myself throughout the day. Every 20 point move down in the Dow felt like it could cascade into a drop of 100. It has just been that kind of market. And Europe has turned investors into a gang of nervous nellies who have come to the conclusion that every series of down ticks could mark the beginning of a Zerohedge led march down the road to perdition.
There are only a few instruments that are worth watching in the current market environment. The US equity markets are keying 100% off of the EUR/USD. If the EUR/USD breaks out convincingly over 1.40 tomorrow, we could run hard in the equity market. If it continues to run into the close Friday, I could see us at 1300 in the S&P by Monday.
The fact that gold is now running alongside a weak dollar and a bullish stock market again adds more fuel to the fire for US equities. I have been bearish on gold since August 21st. I have no problems changing my view if I come to the conclusion that the inflate or die trade is back on as it seems it is. Europe has now joined the global liquidity party in earnest and gold seems to be factoring this in.
I am looking at futures and see that they are up 100 points on the Dow as a resolution out of Europe seems to be finally in place. There will be a lot of investors looking for a fade in the morning if the strength holds overnight. I think that the market may do a good acting job to lure in short sellers. I don't think we get the fade people are expecting, however. It's way too late in the month and there are way too many fund managers that are still embarrassed by their performance. The performance catch up game is still in the 4th inning. With the resolution of the EU situation and a very good earnings season all things considered, there will be no excuses left not to have exposure.
The old guy with the bow-tie and rimmed glasses is standing over the 30 something year old fund manager wondering how such a smart boy could be down 12% on the year? The 30 something year old fund manager feels the breath of the old man and just begins clicking buy. Large, mid and small cap stocks. He wants them all. Not because he understands them, but because he needs to catch up to his friend, his friends friend and his former girlfriend. The rally continues.
