Goldilocks should feel leery about blowing through the old S&P highs. Note it occurred on light volume; and so the move perhaps continues a bit; but should be taken with a grain of salt, as it’s not really complacency but rushing to cover, as well as a strange scenario that takes the market from the edge of breakdown to new euphoria.
All of this (especially given the dubious Jobs numbers, while others are revised in a downward way retroactively) is suspicious; people know that and pushes it up, though often such a move won’t have the extent of follow-through many expect.
The focus increasingly is the idea of the Fed off the charts (actually they should have more post-Brexit justification for hikes) and the yield-chasing game going on a bit longer. Too many (even bears) believe this not only catches traders but persists. So we’ll respect the short-term behavior; but not jump-in at an extended level, which incidentally has reestablished a very nicely-overbought condition.
Meanwhile, the shootings in Dallas did not move markets; the gunman was killed by a police-detonated bomb; and the later shooting of a policeman in St. Louis was virtually ignored. Where this heads is open to pondering for now.
In summary: the Bulls are running in Spain and on Wall Street. But those that are buying might soon get gored.
S&P briefly touched new highs; while most of the world is significantly lower with money flowing into U.S. markets. This capital flow has little to do with our market and more to do with ‘relativity’ of risk, lower bond yields, or even negative rates elsewhere. It’s the prerequisite of lower yields and yield-chasing bidding game.
The S&P is up; everything else is sloppy or lower. We still suspect weakness out there in the weeks ahead; but not very aggressively or immediately, yet. Keep in mind that China already devalued for about a 3rd round; and there’s likely more in the wings. If China devalues it creates another market reversal and snap-back; all of which is in-context of this early-mid July stabilization effort. That’s a reason for hit and run scalps if anything, and not a reason for investors to chase.
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