These rallies are becoming familiar. In early July we saw a streak of 12 of 13 sessions in a row up, early September 11 of 12, and mid October 11 of 13 (current streak). It is a bit uncanny the similarities and how the escalator goes straight up in vertical ascent as we see indexes come out of mini corrections during QE. So we are about at the same stage where the last two began to tire, so it will be interesting if this is similar or if the current consensus of the market that there is nothing to worry about until next year as the Fed and D.C. are both off the table and this 3% annual growth rate in earnings we are now seeing in the S&P 500 year over year deserves even more multiple expansion. 2013 has not been the year of significant earnings growth – it has been nearly all about multiple expansion.
Obviously with this sort of move we are not even sniffing the 10 day moving average.
We are in the midst of yet another V shaped rally and at this point there is no more surprise. It has become the rule…the familiar. This is episode #3 of the second half of 2013; and one can argue this is the most "vertical" of all 3. I do not now show the 5 day moving average on the chart below but the index is as far above it as any time in 2013. The only thing close was 9/18 which was the immediate afternoon sugar high from the "no taper" decision by the Fed.
Ironically these fools in D.C. have created an environment where the Fed won't….ever….cut back QE. After weeks of shutdown and wrangling all they could do was …
The politicians can not agree on anything other than kicking the can down the road. Word surfaced late yesterday the 2 parties may "agree" to kick the can down the road – solving nothing other than avoiding the debt ceiling limit as they work towards a broader "comprehensive" solution. This is the exact same thing they have been saying the past half decade, and each time they try to work on something comprehensive the only thing that comes out of it, is more can kicking. But that could be enough for markets. Futures are …
Once Larry Summers "exited" (i.e. was rejected) as a candidate, all eyes turned back to what was seen earlier as the obvious choice – Janet Yellen. Yesterday after the close President Obama did what everyone expected and nominated her for the head job at the Federal Reserve. Many consider her an uber dove… futures initially spiked on the news but not as much as one would expect, mostly because this was a surprise to no one. But still considering the damage in the markets of late, you'd think it would have provided some more juice. Perhaps the algos go to sleep after 4 PM. Here are some blurbs from the WSJ, and Reuters.
With the 61.8% retracement of the September rally now broken, the risk now opens for a complete retracement of the entire September rally which was topped off by the "no QE tapering" by Bernanke now nearly 3 weeks ago.