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Bulls Take The News They Like: Dave's Daily

Stocks in this article: AMAT AMD SOXX CSCO IGN XBI CVY


This morning markets were lower as news from the eurozone returned to haunt markets. Posted last week was German Factory Orders of -4.8% which many inferred would lead to a German recession. Bulls, what there are of them, ignored that to push markets (S&P 500) to fresh highs. Wednesday came news from Germany (B still follows A methinks) that exports were much lower. This put the euro lower testing ¿126 before recovering late in the day. However, the German DAX Index also lower much of the day hardly budged.

Stocks in the U.S. opened lower and stayed down much of the day until the Green Beige Book was released indicating late 2011 economic growth. That got the 2:15 PM Buy Program Express launched. So stocks rallied late because...well, because they did. With SPX new highs more money automatically comes in to keep things going. Some explain a rally by low PEs. The trailing PE on SPX is now is at 13x which is low but not historically so.

Forward earnings are what matters now but many companies and analysts are lowering forward views. With the eurozone hanging over the market's head bulls still see U.S. stocks as cheap. Bulls are thrilled a global stimulus is in the works. China is easing rates (Shanghai Index up 6% in 3 days) and so is the ECB. Further, many expect Bernank & Co to launch QE3 if it's not already in stealth mode. Global monetary authorities are anxious to reflate and that can get out of hand naturally. But, with political pressures building it's easy to keep kicking the can down the road to save their jobs.

So even as the euro was weak gold rallied Wednesday--easy money from monetary authorities makes gold look better. However, oil prices fell on supply data (plus 5M bbls) not to mention German economic data. The dollar was stronger naturally and bonds fell.

Volume remains ultra-light still meaning the market is being played only by the HFTs in my opinion. Breadth per the WSJ was positive and we're short-term overbought.

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