Stimulus Rules...GDP Doesn't Hurt...
In this game you have to deal with combined efforts from those behind the scene. Those folks will do their best to control whatever it is they want controlled. In this case, it's the European central bank and its leader Mario Draghi and our own Fed leader, Mr. Bernanke, an effort between the two to prop the markets higher to prevent Main Street from falling apart. A few days back, Mr. Bernanke went to the Wall Street Journal and had them put out an article roughly thirty-minutes before the market closed. The subject matter was about how he was going to do something to create economic growth. It played out perfectly for him.
The Dow was down two hundred at the time and sinking fast. It ended up down one hundred. After that, there was the immediate news over night from Mr. Draghi as he told the world he would never let the Euro go away, no matter what happened to many countries in trouble throughout the Eurozone. This collaborative effort has given the markets globally a real shot in the arm to the up side. It may not be fair, but that's the game we play. It's never fair, and I don't think it's going to be getting better any time soon.
We saw a nice gap up today as the news from our Fed leaders globally got an extra boost from the GDP report here at home, which showed the first reading of Q2 to be at 1.5% growth. The market was expecting 1.3%. Nothing good, of course, but with the feel good atmosphere already in place, thanks to Mr.Bernanke and Mr. Draghi, the bears simply gave up to some extent, and allowed the market to go appreciably higher. It started out up a bit, but increased those gains slowly, but surely, as the day wore on. The Nasdaq 100 even taking out large resistance at 2925. Very impressive technically, and some huge resistance levels just ahead to be discussed later on in this letter, but very impressive action, and on some very decent volume for a late July Friday.
Even froth like Amazon.com Inc. (AMZN), which warned, and guided lower, went higher. All of this on top of a 200 P/E. Froth was definitely the play today. You love seeing that, if you're a bull, because you want to see the risk on trade, and not a run for safety we often see when things are more uncertain. So while we didn't take out the biggest levels of resistance yet, the bulls did do some damage to the bears, and their ability to get this market appreciably lower in the coming days and weeks.
When markets have strong days, you want to see the Nasdaq 100 lead, as I just mentioned, but you also need to see the rally be broad-based. It's never healthy if just a few sectors, or leading stocks, are pushing things higher. You always want to see everybody, or at least just about everybody, get involved in the fun. We saw that today. It was solid action, and again, on some very decent volume. To top it all off, it was on some very impressive oscillator movement. You always need to see the oscillators confirm price, for without that, you bring in to question the validity of the price move higher. Everything went right for the bulls today with regards to price confirmed by all of the key oscillators, and since we took out huge gap resistance, that was necessary as a confirmation.
We never know what's going to come out each and every day with regards to news from overseas. We do know that the Fed boys are up to their tricks, and for now, that is putting a solid floor underneath price for the bulls. They simply will do whatever it takes, thus, we look at price points to see when the market can become more directional. The key on the upside is the massive gap at Nasdaq 100 3000 (bottom) up to 3025 (top). Getting through the bottom will be the first step in the right direction. Getting through the top would bury the bears for possibly the long-term. Shocking how little of a fight the bears put up at Nasdaq 100 2925 today, but I can guarantee you war between Nasdaq 100 3000 and Nasdaq 100 3025. The bears know what's on the line-up there, and won't go down without a major fight. Interesting times indeed as we learn the markets true longer-term intentions. For now, the power of the Fed boys is winning out over real fundamentals.