Alright, December, new month, fresh starts, etc. Let’s do this.
From Mike O’Rourke at BTIG, a good overview of the current state of the market, and three potential “catalysts” that could get the bull market rolling again:
Here are the three potential catalysts for which we will be watching. We suspect it probably
only takes one to break the current pattern. First is continued improvement in economic data.
Days like today feel like wasted bullets because the data was good, but markets did not respond.
If the improvement trend continues, it should be harder for the markets to ignore. The next is
the yield on the Spanish 10 Year Government Bond. In the span of a month, yields shot from 4%
to 5.67%. Despite another high close for the move, it exhibited its first sign of exhaustion today.
Greece was the low hanging fruit, Ireland was a few branches higher, and Portugal a touch
higher. The higher the climb, the tougher the picking gets. Additionally, Spain is where the line
will likely (needs to) be drawn in the sand. Finally, there is the ever frustrating Euro/Dollar‐U.S.
Equities relationship. The Euro is now down 9% versus the U.S. Dollar year to date ‐ so much for
the Dollar’s demise. The Dollar’s recent ascent (Euro’s decline) has occurred at a much faster
rate than the decline leading into QE2. On November 4th, the day of the big post FOMC push,
we noted that “We are curious to see which assets sustain their gains in an environment where the Euro weakens for 3, 4 or 5 consecutive trading sessions. That should be a fairly good test of
conviction levels across assets.” Ironically, the Euro has been in essential meltdown since then
as a result of the escalation of the sovereign debt issue. The Euro should be bouncing off
support between here and the 1.28 level, conversely, the Dollar Index should be running into
resistance between here and 82. The Dollar index is now within 2% of erasing all of its losses
incurred since Chairman Bernanke’s Jackson Hole speech on August 27th. Considering the post
QE2 announcement selloff, the Dollar rally and the European mess, the S&P 500 has held up
well. If one of these catalysts breaks in the right direction, Equities should react positively.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.