Marketview: Summer Reflation Continues

• Posted by DynamicHedge
• on July 7th, 2012

Not much to write about as not much has changed since last week.  Money has not come out of treasuries and $SSEC stubbornly refuses to catch a bid.  To my ears the market tone itself is very positive.  We hit new highs this week and the market acted bulletproof in the face of nasty news.  This is bullish action.  Not everything we watch and wait for will confirm because our outlook doesn’t determine the market.  Treasuries could stay in risk-off hangover-mode while the $SPX rallies, although I think the bull market in Treasuries is likely ending.  $SSEC could be decoupling.  Everything else, save employment numbers seems at least decently constructive.  Breadth is very healthy.  What hasn’t changed is the general bearish overhang in the markets.  In other words, the wall of worry is still intact.

Energy is still working and basic materials could easily follow the lead of $FCX higher.  Technology stocks were mixed this week but $AAPL led to the upside.  The bad news is that Euro sovereign yields, the thing I hate watching most, are higher.  I truly cannot wait for the day when I do not care about the yield on Italian 10-year debt.

I’ll be watching $TLT closely and switching back to $BIDU as my China tell as $SSEC correlation with the $SPX appears to be deteriorating.

Winners: $AAPL, $FCX, $GOOG, $HAL, $NOV, $MA, $V, $MCD

Losers: $BAC, $JPM, $BMY, $UNH, $EMR, $GE, $ACN, $UNP

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