Wow! Really strong day today! But, while I hate playing the party pooper, well… there are a couple of buts.
1. Bonds rallied big time (like yesterday) too; suggesting that the strong week-ending spike was all about heightened prospects for the Fed coming to a weakening economy’s rescue. Or, more accurately perhaps, traders anticipating that folks (or fools as the case may turn out to be) believe that the Fed, amid already historically-low interest rates and historically-high corporate borrowing, can indeed rescue a weakening economy.
5-day, 5-minute chart (bonds green, stocks white): click each insert below to enlarge…
2. While, again, the price action in stocks was very strong today, the volume action (notably below average) suggests relatively low conviction among the bulls (i.e., today was more about reluctant sellers than it was raging buyers):
Now, make no mistake, when it’s once again time to get bullish, we’ll be there in a big way. Just like we were from all the way back to the March ’09 lows through the present bull market’s worst correction at the end of last year. It’s just that, frankly, as we’ve been illustrating for the past few months, the risk/reward setup, via the fundamentals, and not to mention the technicals (like the above), just don’t allow us to go there at present.