The winning streak for stocks broke yesterday, with stocks posting a small drop (just 0.3%). We had forecast a summer rally a few weeks back and sure enough stocks have put in a 10-day winning streak.
The important line to watch is lined out below. Bernanke’s verbal intervention managed to kick off a rally when he spoke after the market was closed on Wednesday. But if we drop back below this line again, there’s not a whole lot he can do, after all, he’s promised to maintain QE… which he already had in place.
The single biggest problem occurring today is that the economy is receding sharply while stocks continue to rally hard. The consumer is the economy in the US. And real average hourly wages adjusted for inflation today are still below June 2009 levels.
So, we have a jobless recovery (the unemployment ratio hasn’t budged) an income-less recovery (real hourly wages remain below June 2009 levels), and the yet somehow we have a “recovery” that will result in GDP taking off any day now?
So corporate profits are falling sharply, as is GDP, while stocks continue to rally hard.
Sounds a bit like 2007-2008 doesn’t it?
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Best Regards
Graham Summers