Don't Fight It

For those of you who have the contrarian tendencies and want to short this stock market.  Just stop.  You are fighting an uphill battle.  There are times when you have to step aside from certain sides of the trade.  When you have a V bottom, and persistent strength, it usually doesn't go away for quite a while.  It is a psychological thing.  After the V bottom, you scare out the weak hands and those who want to add exposure wait till they get the all clear sign.  What is that all clear sign?  The market volatility going lower and time.  Time makes the skittishness go away.

We got a blastoff yesterday off a bunch of narrow range days.  It is bullish.  You have quite a bit of equity supply coming in the later part of the week, so I don't expect follow through, but at the same time, I don't expect this market to pullback much at all. You will be lucky to get a one percent pullback, and that will be eaten up quickly by ravenous dip buyers and underinvested fund managers, that have been waiting for a bite of equity for about a month now.

The FOMC minutes should be a non-event, I don't expect much either dovish or hawkish, but Treasuries seem vulnerable to further selloffs here as equities remain resilient and we have run a long way from the beginning of the year.  Also I have noticed Treasuries performance lagging even UK Gilts, not to mention obviously German Bunds since the October 15 top in bond prices.  There is a growing divergence of monetary policy that should drag European rates higher, especially now that Draghi is getting louder about full blown QE to save the European economy.