Rumor of QE3 Is On Its Way Sparks A Melt Up

Midday Market Commentary For 05-06-2012

The Telegraph has all kinds of interesting tid-bits today and reminds us that this is still a news driven market.

“There was a brief wobble for markets during the early afternoon after Mr Draghi said no to any rate cut for the eurozone. However, indices rapidly stabilised after they remembered the more important rumour, that QE3 might finally be on its way in the US. The ECB didn’t hint at any liquidity boosts so all eyes now turn to Washington. Both the Fed’s vice-chairman and chairman will make speeches over the next 24 hours, and, so the theory goes, the spate of weaker US data means that intervention must be on its way. Markets might of course be setting themselves up for a fall in the coming days if we don’t get any supportive words, but for now the optimists are in full control.”

WTI oil is at 85.85 in between trading ranges today of 84.20 and 86.20. Brent crude is currently climbing and trading in the high 101.20 area. Gold is up today at 1638, trading between 1640 and 1633 with a positive bias.

The DOW is at 12358 up 230 or 1.90% (200 day MA is 12270, support is at 12288, black cross formed).

The 500 is at 1310 up 25.09 or 1.95% (200 day MA is 1286, support is at 1288, black cross tomorrow).

$RUT is at 763.30 up 17.22 or 2.31% (200 day MA is 757.43, support is at 746, black cross formed).

SPY is at 131.58 up 2.50 or 1.94% (200 day MA is 128.83, Support is at 129.20, black cross tomorrow). The trend is neutral and the current bias is up.

We were going to short the market about 10:15 when the markets ‘appeared’ to be waning. However, the volume started to drop making it easier for the HFT and ‘Five-Fingered-Accountants’ to manipulate things – which they have done. Markets continued to melt up partially by rumors of QE3 coming our way and quashed any thoughts of going short for at least right now. We will continue to evaluate the situation as the session progresses as our analysis DOES say there is more down than up to come.

The markets are once again riding on thin air which makes intraday prognosticating and tea-leaf reading a black art for only the fool-hardy to believe in. We probably won’t be able to ascertain anything until late Thursday or Friday. Be conservative, be safe and may your profits soar.

@cnn:

“European markets closed sharply higher today with shares in France leading the region. The CAC 40 is up 2.42% while London’s FTSE 100 is up 2.36% and Germany’s DAX is up 2.09%.”

If anyone tells you things are getting better in the EZ, ask them what they are smoking because the outlook is dismal at best. Please read The Financial Armageddon That Faces The Eurozone as a reminder.

@telegraph:

“The Crisis in the eurozone is hitting small companies’ confidence and cash flow, writes James Hurley, with European suppliers demanding cash up front for orders while exporters are being caught by customers delaying payment.

Data from Western Union show that businesses are increasingly shifting payments to the end of the month as they hoard cash and wait for better exchange rates.”

“Glenn Uniacke, senior dealer at Moneycorp, comments on the ECB press conference:

With its direct reference to increased downside risk, heightened uncertainty, flat GDP and a lack of momentum, Mario Draghi’s press conference will have left many onlookers scratching their heads as to why rates were left on hold.

While Draghi has a point in that monetary policy cannot make up for a lack of action elsewhere in the banking and political apparatus of Europe, watching and waiting could be a woefully flawed strategy.

Knee-jerk policy reactions are less effective than a determined and committed policy stance. Caution and procrastination could be the catalyst of the eurozone’s collapse.”

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Written by Gary