Stocks get pulled higher today on a combination of dovish comments out of China (I know), a big M&A deal in industrial conglomerates (Eaton for Cooper Inds) and a lack of horrific Euro headlines overnight. And they were due for a bounce after 13 down days in the last 15 for the Dow.
There is a Push-n-Pull thing happening with US equities here that is very difficult to deal with on an intraday basis but makes a lot of sense when viewed from a further back perspective. It's never easy stepping back from the quotes on whatever we're trading to look at the big picture. But it's become a skill that I've become determined to learn these past five years. I will probably still be learning it a year from now, ten years from now and forever.
The Push lower comes from:
1. A rapidly deteriorating sitch in peripheral Europe
2. A looming recession for core Europe based on all of the latest readings
3. A slow-mo bank run (bank jog?) that some feel portends a credit freeze if it spreads
4. Awful macro data from China when seasonally-adjusted and put together from various sources (Beijing PMI, HSBC Flash PMI, real estate metrics, available credit, commodity consumption/warehousing etc)
5. Second derivative slowing in US housing / jobs data (still growing but growing at a softer pace)
6. Corporate earnings peak fears (last quarter's beat rate dropped from 72% to 59% as the season wore on, guidance was meh)
8. Technicals are shot, key sectors/ indices broken, Dow Theory sell signal with trannies and industrials confirming the drop
The Pull higher comes from:
1. Stocks are hated
2. Stocks are not especially expensive
3. Bonds are over-loved and totally unproductive for investment capital given current yields
5. We are out of crisis mode on unemployment and housing/foreclosures
6. Euro leaders desperate enough to pull another shock-and-awe announcement out of their asses any minute (aka Tapebombing)
7. Everyone's leaning the same way (wait-and-see mode)
8. The market is here to frustrate me and I am lightly invested
So there you have it, your guide to the push-n-pull currently underway.
Enjoy your summer.