The early news this week regarding the Euro drama sent yield’s on certain EU sovereign junk debt to new highs, yields on US debt to new lows and the US Equity markets down nearly 3%, before all found support at key moving averages. Then, while the bewildered markets were backstage during intermission, Draghi, (head of the ECB) extended his jawbone and announced that he will do whatever it takes to keep the Euro intact. Those words brought the market out for their second act, a performance that rallied the US Equity markets 4% thus ending the week positive.
Economic reports showed a slowing US economy with GDP growths at 1.5%, but the facts are that it’s not contracting as much as initially thought. Job claims improved significantly and Housing is on an uptick as rental prices have increased allowing speculators to buy distressed properties.
Every day I get e-mails from almost all market gurus about an imminent economic collapse and market meltdown, yet stock prices are up almost 9% since early June. To co-opt a phrase from Shakespeare "A young man married is a man that's marred" can also be applied to the markets as getting married to a market viewpoint (especially when based on the Media’s consensus view) will mar ones equity. Stepping back, every rumor regarding the Euro debt crises has been a buy opportunity for stocks. The chart below is a daily chart of the SPY and it shows a bullish market phase with a new positive slope of the 50 day moving average.
Another good sign is that volume continues to be strong on the up days, a divergence form the norm. Sentiment is positive and the market internals are looking supportive overall. Due to an extended travel schedule, videos will resume next week.
Have a Great Weekend