“We went on record in mid-August and said the market could move 5% in September and 10% by year-end up or down depending on the headlines which is why we showed you the 10-year charts again.
The targets we gave were Dow 14,000 or 12,600 in September followed by 14,500-14,600 or 12,000 by year-end. We said the S&P 500 could be at 1,500 or 1,350 next month which would lead to 1,550 or 1,275 by Thanksgiving/ Christmas. We mentioned the Nasdaq could push 3,225-3,250 or 2,925-2,900 in September and then 3,375-3,400 or 2,800-2,775 on continued strength or weakness.
Last week, the market moved 2% on the ECB news but nothing is a given until Germany gives the green light on the ECB’s “plan” of a “conditional” bond buying program. The austerity measures are stringent which may prevent Spain and other countries from applying for it right away. Of course, nothing was really accomplished but it sounded like the printing presses were getting some fresh plates which should keep the debt-yields down on Italian and Spanish bonds.
The bulls were also helped by China which announced its own “QE” package with more than a trillion, or $160 billion, infrastructure spending program. This pumped China’s stock market up by nearly 4% but they could be reporting some very disappointing economic numbers starting this week. China wanted to announce some good news before it reported the other news over the weekend and into this week.
U.S economic news is also heavy again this week but the market will be more focused on what Germany says about the European Stability Mechanism (ESM) and the EFSF. The news should be out before Wall Street opens. The Fed is hoping Germany signs off on everything because they will meet on Wednesday with a statement on Thursday.
Given the weak jobs numbers, there is a lot of pressure on Ben Bernanke to do something but if Germany doesn’t approve Draghi’s new plan, Big Ben could stall as he is not willing to show his hand first but might have to.
The jobs numbers from last week may have handcuffed the Fed or been a blessing as QE3 is still going to come sooner rather than later. It is on Bernanke on when he wants to make it official and the market won’t know for sure how things will play out until week’s end.
We have said any negativity this week could cause a pullback and longer-term selloff but we wouldn’t be surprised if there was only a slight pullback to support and then a strong year-end Romney rally. It will just depend on how things play out this week and for the rest of the month.
The U.S. debt ceiling will again be in focus over the next few weeks and earnings season will start back in October. This means between now and the rest of the month, we could see more warnings as there have already been some high-profile names lowering guidance.
The charts are showing one last possible push to new highs and we will continue to try to play the momentum higher but we aren’t ready to go all-in. At some point, the technical picture should take over instead of geopolitical news and events which will favor the bears. In the meantime, the bulls are doing their best Pink Floyd by adding bricks to the wall of worry.” (from 9/9/2012 Weekly Wrap/ Monday Morning Outlook)…
The market made another strong push last week as the major indexes hit multi-year highs following the “good news” from the Fed and Germany. All of last week’s major events went perfectly for the bulls after China got the ball rolling before Monday’s open followed by Germany signing-off on the ESM on Wednesday. The big bat grand-slam swing came on Thursday from Fed Chairman, Ben Bernanke, whom many doubted would bring out the bazooka. Wrong. The Bernanke knew there was no bluffing this time as he waited for the rest of the world to commit first and, figuring he had the best hand, he is putting the U.S. all-in. The call is $40 billion a month but this pot is going to get bigger and Big Ben has $40 billion more (a month) he can play poker with. One thing is for sure. The market is going to get very volatile from here on out.
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