Ben's Winning

David Fry's picture
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    Bernanke gave more testimony on Wednesday emphasizing and defending all
    Fed policies. He successfully parried all questions about QE and ZIRP risks and
    made no mention of any policy exit dates. Bulls translation, the printing press
    will be on “auto” to infinity.

    Interesting testimony tidbits were:

    “Fed could go some time without sending profits to Treasury,” (Fed is
    allowed to be a deadbeat).

    “Savers will benefit with economic recovery; savers won't get strong returns
    in a weak economy,” (So not in my lifetime?).

    Not to be outdone, the ECB’s Draghi made equally curious comments:

    “We do not act to help banks or governments,” (nose growing).

    “Things are going much better in Germany than in rest of Eurozone,”
    (duh!) .

    “We see significantly lower than 2% inflation next year,” (when you make
    up the data).

    “Our monetary policy remains accommodative, and far from point where we
    can have an exit in mind,” (you starting to see central bank joint talking
    points yet?) 

    “Pre-Crisis people were living in a ‘Fairy World’, thinking spreads
    reflected reality,” (now they’re living in our “Fairy World”). 

    Little mention was made regarding Italy even as Berlusconi patronizingly
    stated:

    “Italy needs to keep finances in order and needs to reform public institutions
    to ensure political stability. (Stating the obvious clearly—he’s a reformer
    dammit.)

    Most of all this just confirmed to Bulls that all systems were “go” to
    rally. Algos jumped squeezing whatever shorts were in existence since you can’t
    fade these central bankers—at least not yet. It’s as if nothing negative happened
    Monday as everything reversed course. Gold (GLD), the dollar (UUP) and bonds
    (TLT) fell. Commodities (DBC) also plunged, as energy prices were weaker along
    with precious metals. Stocks exploded, helped in part by better data from
    Pending Home Sales (4.5% vs 3% exp. & prior revised up to -2% vs -4.3%) and
    a mixed bag for Durable Goods Orders (-5.2% vs 4.6% and prior & ex-Transportation
    1.9% vs prior 1%). If you’re interested, we did a brief video analysis of
    homebuilder (ITB)
    today.

    Meanwhile, China stated it was searching for ways to promote stock
    prices by allowing some state organizations, previously restricted from owning
    stocks, to buy them. Eurozone Economic Confidence (this is before the Italian
    vote) rose to 91 vs 89.5, which means the
    confidence level was high but after the vote may not be so.

    Headlines were screaming that “stocks were reaching all time highs,” which
    while gains were impressive, we still have a ways to go for that—ask any dotcom
    holder. Leading markets higher were transports (IYT) with just about all other
    sectors following in line. Evidently bulls aren’t one bit intimidated by
    sequester but remember that we’re also nearing month-end window dressing. Apple
    (AAPL) disappointed shareholders at their meeting by not announcing anything
    regarding their cash stash. Overseas markets weren’t as enthusiastic especially
    in higher beta sectors.

    Since it’s Wednesday, our colleague David Gillie wrote his usual brief
    but targeted ETF Mid-Week Peek, which
    should add to your assessment of conditions.

    Volume was light overall as has been the routine on recent melt-up days.
    Today’s volume in SPY was more than 100M shy of Monday’s sell-off. Breadth per
    the WSJ was again quite positive.

     

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We’re still maintaining a 40% cash position but long other sectors as
noted where applicable.

Thursday is Jobless Claims again, GDP and Chicago PMI among other
things. The last of the earnings will feature mostly retail as is customary.
J.C. Penney (JCP) reported a crummy report and the stock is down 13.75% in
after hours trading as of this writing. Groupon (GRPN) also reported a stinker
of a report driving the stock down by 26% also after hours. These are the kinds
of stocks which investors can choose to ignore and leave on an ice floe
somewhere to die.

Lastly it seems all the hoopla about the sequester is fading making it a
non-event except for those with soap to sell.