Putting aside the already high flying Asian markets, where Hong Kong and Malaysia closed at new cyclical highs, US equity futures were also highly demanded. A bit of mystery we saw as NY Fed Manufacturing Index came in below consensus expectations of polled economists. It was a bit trickier with US retail sales, as last months headline was reported stronger than estimated by consensus economist, but assuming the revisions of previous month they were in fact below estimates. After initial zig-zag US stock futures markets retreated a bit, however, cash market opening at the NYSE brought a stunning bid. Obviously, those who cannot afford (also due to legal constraints?) even an e-mini S&P500 futures contract on CME were the "Big Boys In Action" this morning ...
There is no doubt, except bears, for China rising. Everyone should learn from Goldman's O'Neill how the unpleasant question about Chinese gasoline consumption should be answered. Really smart and convincing, and everyone should fear missing the "Story of Our Generation". However, Stephen Green at Standard Chartered was trying really hard. Impressed? Markets speak for themselves.
What is important? US Large Caps are powering ahead ... and releasing dopamine. Champions of Latin America still lag behind, but very close to follow US Large Caps.
Jeff Saut, the strategist at Raymond James, one of the best leading through the jungle of last recession, has a simple message today:
We think the normal economic cycle will play once again. If so, economic reports, fundamentals, and earnings should continue to improve, putting even more pressure on underinvested participants (according to the latest surveys, hedge funds are only ~52% net long). And, that pressure should buoy stocks into the first part of 2010. It is the back half of 2010 that begins to worry us due to harder earnings comparisons, loss of the “sugar high” stimulus funds, higher taxes, an election year, increased government regulation, etc. In fact, it is the probability of further government regulation of corporate America that worries us the most, and we are not alone...
And the call for the week:
In bull markets, be they secular or not, it is rare to get anything more than a 7% - 10% correction; while we have been looking for such a correction for more than a month, time is running out. The trick then becomes to commit some capital to areas that have good risk/reward metrics. By our pencil, the sectors displaying the best relative strength are Energy, Consumer Non-Cyclicals, Basic Materials, and REITs (real estate investment trusts).
So, don't climb the wall of worry? Respect the market.
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