This is not very encouraging:
There’s a reason we flipped bearish ahead of the holiday last week as the run-up seemed fake, Fake, FAKE – just more low-volume, manipulated BS on bad news that lead to the anticipation of more QE but, as I noted earlier in the month, the G20 already fumbled that ball and the bears, while not yet in control – are certainly marching back down-field.
Remember, our bullish premise was never about anything more than QE and there was simply not enough QE offered (at $10Bn per S&P point per 6 months) to push us back over 1,400.
Now we face the potential horror of earnings season which may be somewhat abated by the accounting changes allowed in the Transportation bill that we discussed last week. While those changes may provide a one-time boost to earnings of many Billions of Dollars – the strong Dollar will also be a big negative to the recognition of International revenues and International revenues ain’t so hot in the first place.
While taking some bearish flyers over the weekend (see Stock World Weekly for details) – our primary position is to stay cashy and cautious as we watch this little drama play out in earnings’ first week. AA reports tonight and we’ll see how they end up accounting for their substantial pension obligations under the new rules and that will give us a big more of a clue as to how to play the rest.
We also have a ton of Fed speak this week as the US looks to peddle over $100Bn worth of new debt and, with the 10-year auction on Wednesday (right before the release of the FOMC minutes at 2pm) and the 30-year on Thursday – it has often been a very good bet to play the market lower into those auctions as nothing sells bonds like a stock market panic, right?
Perhaps that’s Spain’s problem – not enough market panic – as Spanish debt flies back to that danger zone at 7%, just two weeks after they are “fixed” by the EU, ECB and IMF. Spanish Prime Minister, Mariano Rajoy, may unveil a third austerity round within days as his six-month- old government tries to avoid a second bailout amid hemorrhaging tax receipts. Rajoy said on July 2 the time has come to “press the accelerator pedal” as…
