Behind the rally

When in doubt, stay long quality and use rallies to pare back the stuff that needs global growth to work, Brown writes.

Jin Lee/AP/File
A trader looks up at a monitor while working on the floor of the New York Stock Exchange in New York in this August 2011 file photo. In the absence of momentum outside of housing, Q4 estimates probably still have room to come down, Brown writes.

A few things here -

First, today's snapback rally was one of the more predictable of the last few years. We talked about the setup for it yesterday. Everyone was too negative and stocks had dropped too far too fast. Oversold conditions were obvious by mid-week and by Friday they had gotten totally carried away - all ten sectors in the S&P were trading at two standard deviations or more below their 50-day moving averages. That's a collapse and an unjustified one at that.

Second, this can continue so long as the headlines coming out of Washington remain conciliatory and the most vocal opponents of higher taxes start to just get used to it and get on with their lives.  Markets will be benign in the absence of shouting.

Third, in the end it won't matter so long as the only strong segment of the economy is housing. In the absence of momentum outside of housing, Q4 estimates probably still have room to come down. This puts a leash on how far equities can go, we've just seen that phenomenon at work after the June-September run. 

Like clockwork, the rally into year-end camp will be back out today, emboldened by the screens o' green. They're adorable.

When in doubt, stay long quality and use rallies to pare back the stuff that needs global growth to work. It's too early to be there.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to

QR Code to Behind the rally
Read this article in
QR Code to Subscription page
Start your subscription today