Bernanke Put Irrelevant?
Kevin Cook here for Steve the rest of this week as he takes some R&R...
They came. They heard. They cried all the way home. The weak bulls that is, who, after reading Ben Bernanke's prepared remarks before his Senate testimony, ran for the exits on fears that QE3 isn't coming after all. Then, before you could say "low volume rally" it was the bears' turn to feel sick as the market reversed and ramped from S&P 1345 to 1365 in a few hours.
The constructive technical picture that the S&P has built since the June lows keeps feeding on its own strength. Two weeks ago as the index headed toward support at 1330, I warned that this may merely be the "shake-out before the break-out" to new post-correction highs above 1375. So far, the bulls still own the field in the rising price channel as they plan the assault on the next resistance levels.
But something else is going on regarding the fundamental picture. While the economic data has certainly been weak and earnings have been a mixed menu of bland to sour, the sentiment about whether we need or want more QE any time soon has shifted. It's as if market players are relieved we don't desperately need it and we can fearlessly put the spotlight on Congress for their second shot at budget-wrangling stardom... or disaster.
Whether or not our politicians can actually make good and tough compromises, pro equity investors seem to be looking past a lot of our current headwinds. It's as if they see 2011 all over again, but without the unnecessary cascade of stock prices. Last year we didn't go into recession and Europe didn't implode.
So the playbook of portfolio managers is this: "Stocks are by far the most attractive investment vehicle in the land, and their downside risk is likely tolerable. But we cannot afford to miss the upside."
For more on this bull-bear debate, be sure to check out the economics conversation we started on whether or not this summer will be a "3-Peat" of the last two. You can find it on the Real-Time Insight blog at "Fool Me Thrice?". Our Chief Equity Strategist and resident quant John Blank offers some compelling arguments for higher stock prices.
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