The extra 22 Billion in USD terms is going to find its way to US based Risk Assets via carry trades from European stimulus Measures. 2060 is the next upside target for the S&P 500 Index (SPY), we will have pullbacks and retracements along the way, but we should be considerably higher over the next 6 weeks in Risk On Assets like equities. I anticipate ultimately putting in a new high sometime over the next 6 months conservatively in the S&P 500, i.e., think in terms of the 2150 area, with a more aggressive upside target of the nice round number of 2200 in the Election Year.
Don`t focus on Energy company earnings as they are going to be awful, keep in mind money has to be stored somewhere, and now an extra $22 Billion a Month needs to find a home in financial markets.
If you are short the market you need a likely catalyst that is new for your cause, your best case outside an unforeseen Geopolitical or Natural Disaster event would be a spike in wages that leads the Bond Market to bust through 2.40% and 2.65% Yield levels on the 10-Year US Treasury Bond, and ultimately blow through the 3% line in the sand where the Bond Market is susceptible to crash scenarios from a price standpoint.
If we are wrong in this analysis the likely reason is that we are stuck on the latest move in a “Trader`s Market” expecting continuation, and in fact we are one move behind, i.e., the shorts expecting more continuation to the downside at the lows of the year in Risk Assets. The shorts were one move behind, still stuck on the last move, and missed where the markets were going on the next move.
This doesn`t matter as we are Traders and will have forecast models from a theoretical standpoint, but ultimately the markets dictate from a price action standpoint where we should be aligned from a Capital allocation standpoint. However, Investors who are not as fast, flexible and become entrenched in directional bias could wish they sold this rally, if indeed this is the “last move” and we are headed lower into second quarter earning`s season.
