From Peter Tchir of TF Market Advisors
It's Bear Hunting Season
The capitulation of the bears continues.
In this zerohedge article, Janjuah says the market is so rigged its hard to offer meaningful insights [7]. It is a very good read.
In this weekend’s Barrons, the Alan Abelson column looked like it had been written by Abby Joseph Cohen (or some other permabull).
The ECB and Fed seemed to have pushed Roubini and others into the capitulation. As a rough guess, only about 3 of the up days this year had anything to do with earnings and economic data (the NFP day being the most obvious). The rest were all induced by some political or central bank action. Frankly I’m surprised we weren’t up more in Europe today with the Chinese Bank Reserve Ratio getting cut.
At any moment we should get details of all the next steps for the Greek bailouts. We will get to see the ECB swap, the PSI proposal, and retroactive collective action clauses. It will be interesting to see how that works. After the Greek default (yes, bondholders giving up 50% of their notional is a default), it will be interesting to see how Greece does. Hopefully they will actually spend some time trying to figure out alternative ways to finance themselves than the ever more onerous bailout packages from the Troika.
The market feels like it is trading long. It felt very ugly on Thursday morning, and with additional capitulation by the above mentioned bears (and others) more people have committed to the market. Will this finally chase new money into the market? Somehow I doubt it. Will Apple add another $100 billion of market cap in less than 2 months? HYG didn’t get any new assets all of last week, and JNK, which did attract assets over the course of the week, had its first day of outflows. How much money is really still on the sidelines? And how much good new and money printing is already built in? We will find out, but Friday’s small rally was a bit disappointing, and Europe’s relatively small gains today also seem underwhelming. Maybe we need the deal to actually hit the tape to rally? Or maybe that is going to be the sell the news event, especially if there is really strong resistance to PSI.
US data has been better, but we wait to see if the weather was a bigger influence than the bulls believe. Chinese data remains sluggish, and that is if you actually believe it. European data has been fairly weak, and I’m not sure that whatever the Troika and Greece agree to, does anything to reduce the risk of recession, and if anything the currency strength won’t help.