7/20/11…the world is blessed!

Bloomberg Top Stories:


*EU Said to Weigh Bailout Fund Use for Emergency Credit to Thwart Contagion

*Stocks Rise on Earnings as Treasuries, Dollar Weaken; Spanish Bonds Rally

*Papandreou Sees Make-or-Break Time in Debt Crisis on Eve of Europe Summit

*Basel Regulators Force Banks to Cut Plans for Contingent Convertible Bonds

*Sovereign Crisis Erodes 75% of Junk Bond Gains as Losses Spread

*Wisconsin Borrows After Yields Slide on Union Benefit Curbs

*Treasury Explores Plan to Help 1 Million U.S. Homeowners Avoid Foreclosure

*Murdoch’s Refusal to Take Responsibility May Undermine Credibility as CEO

*Senate Deal Praised by Obama Faces Resistance From House Republicans


Volume was higher at 3.9B shares while Big Board volume remained stable at 870 million shares. Meanwhile the VIX gapped down and closed at 19.21. The 40, 50, and 200 day moving averages are all clustered at 18.17-18.52. Watch!


The Dow surged 1.6% on the potential debt ceiling agreement; Transports +1.2% vs -1.1%; S&P 500 +1.6% vs -0.8%; Nasdaq Composite +2.2%! vs +0.9%; 100 +2.3% vs -0.5%; Russell 2000 +2.3% vs -1.6%. New 52 week highs surged again to 179 from 84, while new lows were stable at 78, a day after turning the ratio negative for the first time in months. Advance/Declines ran +4:1 vs -5:1 on the NYSE and +4:1 vs -5:1 on Nasdaq, while Breadth was +4x vs -11x on NYSE and +5x vs -6x on Nasdaq!!!

This was clearly a relief rally…the question is do you fade it? The 30 yr bond surged 2 points on the debt ceiling talk…stocks and bonds up the same day?


Overnight global equities are up: UK’s FTSE +1% vs +0.5% vs -1.1%; French CAC 40 +1.6% vs +1.3% vs -1.5%; German DAX +0.3% vs +1.3% vs -1.2%; Nikkei +1.2% vs -0.9%; Hang Seng +0.5% vs +0.5% vs -0.3%; Korean Kospi +1.2% vs flat vs -0.7%; Indian SENSEX DOWN 0.8% vs +0.8% vs -0.3%. U.S. Futures rallying for a second day: DOW +58; SPX +6.50; NDQ +21.50 – HUGE!!! Gold is $1582.20 -$18.90 after hitting a new record high of $1610.70 Tuesday, while Crude is $98.82 +$1.32, still very volatile, the 50 day is support at $97.45. U.S. treasuries mixed: 10 year 2.90% -3/16; 30 year 4.21% -5/16.


…yep, blessed…the problems of the world are solved…because of six enlightened (perhaps they read the polls and saw the position on the debt ceiling was not only unfavorable but mainly blamed on the GOP?), Congressmen…the question is whether their colleagues are as enlightened…seems doubtful and if that is the case yesterday’s stock surge was merely a relief rally…although most earnings reports were positive.


As always, the devil is in the details and despite talk of revenue increases along with cuts, the alternative minimum tax may be about to go…good riddance as it was enacted by the Dems to get about 100 wealthy individuals that paid zero taxes. The tentacles, since it was not inflation adjusted have reached down to the point where at least the top 10% would be hit with it if stopgap delays hadn’t been implemented. By the way, a severance can throw you into the category…talk about unfair…and TB would bet that those same 100 and more still pay no taxes or not even the 21% average for the wealthiest 1%.


Time to sit back and see what happens…but it is never a good idea to chase a rally…especially when multiple obstacles abound.


. . .  – – –  . . .    . . .  – – –  . . .


Today is the 20th day that Minnesota’s economy has been held hostage to a lack of a budget. A special session is on to vote, after venting, with no changes allowed…it is take it or leave it. Meanwhile, the fillers come from robbing…er borrowing from education, and the tobacco settlement. See, how easy that was…and what little it accomplished at great expense to the economy? Sheesh!


Have a terrific day!




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