By: Rich B. Meier
The stock market turned on the power yesterday due to housing starts, high German consumer confidence, and a well-received Spanish bond auction. Top Equity News even heard some random dot com prognosticator actually suggest that Spain’s debt sale might be the tipping point back to sanity.
Ah – yeah guy, ain’t going to happen. The Zeuropean Union (if you use this phrase, please credit Top Equity News) is heading into recession. That will dent the German’s self-image and put to rest any notion that the debt-circus is headed out of town.
In fact, the world’s largest bond fund manager, Pimco’s Bill Gross, tweeted, “Today is a Santa Claus rally! Prepare 4 record cold winter, solstice upon us. Eurolnd wl not go away. China lurks. US not an island.“
As for the housing numbers, the entire surprise was the result of a 25% jump in 5+ multi-family units. Single-family homes is the core number, the important one that really matters. That line is still bouncing between guardrails built in May 2010 – get back to us when builders crash through the upper boundary. Until then, it is the status quo.
TEN doesn’t want blizzard bury the sunshine and palm trees, heck; we prefer the tropical warmth too; however, we are compelled to expose our readers to what’s happening behind the curtain.
While we doubt that Tuesday’s boost in prices will be long lasting, Santa’s ride could continue on up to NASDAQ 2620, Dow 12,000 and 1260 on your S&P dial. That means there is probably a little money to be made left on the table, but TEN would be inclined to move cash to the sidelines as the sleigh approaches these addresses.
There is a head-and-shoulders pattern emerging on the S&P and NASDAQ charts; to us, that translates to limited upside with the potential for heavy downdrafts – really not the risk/reward profile that makes for successful trading.
Unless and until the indexes all set post August 2011 closing highs, it’s prudent to stay away from the pendulum’s sharp edges. TEN will do its best to guide you through it. Make sure you check back with us tomorrow.
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