Strong Treasuries Bounce

The strong bounce that you are seeing in the Treasuries over the past 2 weeks is a big boost to the bull case for the S&P.  The bond proxies will get a much needed reprieve, and this bond strength is happening despite the S&P near all time highs.  Also, I still see no enthusiasm for this S&P rally, despite all the contrarians harping about big inflows and excessive bullishness.  I just don't see it in the media.  Maybe there are a lot of shy bulls, like shy Trump supporters.  Bulls are definitely not that loud in public.

The biggest bear case for stocks was a big rise in yields causing interest expense pressure to corporations and slowing down housing and borrowing.  It seems like that is definitely not the case.  Yesterday's FOMC minutes showed a Fed that is still cautious, and leaning dovish, despite throwing out their worthless 3 rate hikes in 2017 dot plot projection.  They are always throwing out new uncertainties that prevent them from hiking, now it is fiscal uncertainty.  What will it be next?  The French elections?  Then the German elections?  They are a complete joke.

Those thinking the Fed can continue to hike rates and are bearish the stock market are holding incongruent views.  The Fed will only continue to hike if the stock market is going up.  They will either freeze or cut rates if the stock market drops.  That is how the post 1994 Fed operates.

Sad to say, but until we get more bullishness in the US stock market, I think we will continue to grind higher with only small pullbacks.  Any drop down to the 2016 close at SPX 2240 will be bought with both hands by fund managers.  As old and tired a strategy as can be, the buy the dip strategy still works great in the S&P.  It should continue until you start seeing some serious bond market weakness and excitement over Trump's tax cut plan.