Frustrating day today for the bears. I am not surprised at the rally, should have been expected, but the way it rallied calls much into question. Back to no volume, mindless upgrades, dollar getting slaughtered, and (most importantly) high yield credit surging (yields going down). Seemed for sure the momentum was finally broken last week. Instead, a weekend erases all memories.
Goldman upgraded several banks today. This really kicked off the rally as the financials never looked back up 3.15%. First of all, it is amazing there is anyone left to upgrade (hasn't every company been upgraded like 5 times already?). Second, of all, the banks upgraded are up between 100 and 300%. How can you upgrade them now? Either way, it is concerning from a bears perspective, because Goldman probably knows what the banks earned in Q3 and it is an implicit upgrade for the entire banking sector. This is why the banking sector and the markets flew. I keep thinking this should be obvious (remember the gaming of the end of Q3, banks were part of the big beneficiaries) and already priced in. I guess when you are pricing things into infinity, there is no top limit where it is priced in.
Dollar continues to trade very poorly. It may still be getting ready for a big rally but so far the way it is trading is saying no. If the dollar starts falling again, equities of course will start rallying.
The most concerning thing of all of course is junk debt continuing to tighten. Shows how the speculative juices are flowing when this happens. Money just keeps get poured into this space. This means junk companies will continue to be able to not have to pay back debt and just refinance.
So the bears are back to on edge wondering if the system is still gameable or if the game is finally ending. Market needs to hold this 1040 to 1044 area. A rally was expected. Very frustrating the way it occurred today. All the economic data the last week in a half that showed the economy is not rebounding as thought was simply forgotten. Makes life alot easier when you can just forget the bad.