(Marco Bonelli) It's all relative!
- To which degree the intention to fund European banks and a bit more clarity around Greece and the situation of the Eurozone is already reflected in a 13 to 20% rally in the US (over seven trading days following a 15 to 30% decline over two months).
The recent rally from new lows last week Tuesday is the sixth rebound since the markets fell off a cliff end of July, beginning of August and certainly the most powerful which finds many stocks trading at multi-year or even all-time highs, mainly in the technology and consumer sector. Over the last couple of weeks, Europe apparently became the center of all concerns, even more concentrated than at the beginning of the market turmoil. The fact that we are in a slow to no domestic economic growth environment and a decelerating global economic and earnings environment gets more and more ignored or pushed to the back-burner.
It's interesting to mention, that the stock market closed at the lows of the day, despite an overall solid gain. Market participants got excited that the Dow Jones tipped into positive y-t-d performance (although it couldn't hold it into the close), that the SPX broke above the psychological 1200, that the Nasdaq Composite broke above a 2600 resistance (although it failed at the 100day MA), that the NDX broke above its 200day MA (although it didn't manage to break above the September highs at 2337.70 and also break into the 2-year uptrend (2345.50)). The rally pushed almost all indexes back to a number of minor and major resistance levels, also the upper Bollinger Bands, to mention just one. The Nasdaq also opened up just another two gaps, a frequent pattern over the last weeks and so far, each of the gaps got closed. Finally, as a result of the "risk-on" trade and a more positive perception towards the economic outlook, bond yields recovered to levels well above when "Operation Twist" got announced.
Let's hope the rally lasts a bit longer and the stock-market really logged in a bottom but we should also remember that the higher prices move, the higher the risk for a serious pull-back grows once the market gets reminded that the fundamental picture doesn't improve and various uncertainties still persist. But this observation is also all relative!