December 27, 2018

Interesting reasons for the US market DJIA 1000 point rally

Last Friday, when stocks were tumbling, we reported "some good news for the bullswhich was lost in the overall chaos over the latest mutual fund liquidation discussed earlier.
And no, we did not anticipate that President Trump would activate the Plunge Protection Team over the weekend: the good news in question was that as Wells Fargo calculated U.S. defined-benefit pensions fund would need to implement a "giant rebalancing out of bonds and into stocks" - in fact the biggest in history - with the bank estimating roughly $64 billion in equity purchases in the last trading days of the quarter and year, prompting the banks to ask if traders are about to make pension rebalancing "great" again.
Judging by today's market action, the answer is a resounding yes, even though as Wells warned investors and traders looking for a desperately needed respite from market gyrations "may have to deal with yet one more seismic bout of volatility before Dec 31 finally pops up on their calendar dials."
To the bulls, today's rally was long overdue.
Whether today's record 1,086 point surge (and 5% jump) in the Dow was the result of Trump saying yesterday that shares present a "tremendous opportunity to buy" (so BTFD), or thanks to White House advisor Hassett's assurance that Fed Chair Powell's job is "100 percent safe", or due to a major short squeeze of CTAs all of which had just turned short on US stocks, or the result of a massive $64 billion pension reallocation into stocks, or simply a bounce from massively oversold conditions, one which saw the RSI crash to 14 on Monday and the CNN Fear and Greed index plunge to a record low...

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