Then Gold will rally will correct
Then Commodities will rally will correct
Then US Dollar will correct will rally
One of the reasons for an abbreviated commentary this week is that I don’t have much to say. As I’ve stated a number of times, the “fix is in” in the Euro Zone with much more liquidity to come. Central banks are being as accommodative as they can be (maybe too much) and the markets love this kind of environment. We’re experiencing a feeble earnings season and stocks are still rallying and are within range of post crash all time highs on multiple indexes.
What might throw a wrench into the works? Maybe a Greek default, but other than that, I see nothing on the horizon that would derail this rally. And even a Greek default might not be as cataclysmic as some are predicting. The concern here would be the total value of the derivative market connected with guaranteeing Greek debt. But no one knows what the possible exposure is. I’ve read estimates from near zero to trillions. That means no one knows … J In any case, Mario Draghi has accomplished what he needed to do to alleviate the crisis. He’s pumped Europe’s banks with Euros thereby insulating them from any financial fall out from such a traumatic event. I’d be looking at a Greek default as a buying opportunity as there would certainly be a sharp, significant sell off in equities which would quickly be reversed.
If my bullish thesis on stocks is correct we will see bond yields starting to back up and higher commodity prices. As I said above, yields will not back up significantly but commodities should start seeing strong price action. A failure of commodities to advance would make me have to reconsider my bullish thesis on the economy and equities.
Have a great week!