Thursday, July 26, 2012
Its Quantitative Easing or Bust
It is quite clear the market is waiting for the world’s central banks to print more money. Futures were heading lower along with European markets when the ECB’s Draghi issued comments about saving the EURO at all costs. Translation: they will print EUROs. The stock market’s reaction to Draghi’s comments were positive as price gains were strong on above average volume. End of day action wasn’t ideal and the S&P 500 was the only index to look ideal. However, what a difference rumors of quantitative easing will do for the market. There isn’t something quite right with this market, but with the hint of further easing the market will continue to trade wide and loose. Earnings season has not been kind as we are on pace for a very disappointing earnings season. While we are very price driven we focus on growth stocks. Unfortunately, without growth in fundamentals our universe of stocks shrink and this is the current situation we are in. The lack of growth in the market on the fundamental level has us seeing a narrowing universe of stocks. Not to mention this earning season has destroyed a few of our leading growth names. We can always hope the miracle of quantitative easing will save our stocks and set off another rip roaring rally. The AAII survey continues to lean towards the bearish side of things. It is easy to see as why the folks answering the survey are bearish. Earnings season is not spectacular and economic news has NOT been good. June’s PMI were very negative and recent home sales both pending and new have been disappointing. Manufacturing data has not been signaling growth, but contraction. Outside of quantitative easing there isn’t much to be bullish on. The next FOMC meeting is next week and on Wednesday they will release their policy statement and rate decision. We’ll focus on price and follow our rules while the rest use discretion and opinions to navigate this market. Tomorrow’s GDP report will set off fireworks for the market. Sit back and enjoy the ride! Have a great weekend.