Stronger Euro

Europe just cannot handle a stronger euro.  A weak euro is the lone supporting mechanism for the European rally.  If the euro gets stronger and Draghi doesn't do anything about it, it is a free fire zone on European stocks.  The Fed has entered the currency war, surreptitiously under the guise of global worries and waiting for more inflation to raise interest rates.  With the Fed now in the currency devaluation camp, although not as blatant as Europe or Japan, or China, it is now a zero sum game.  For every winner, there will be a loser.

Last year, all the countries could prosper under a stronger dollar regime, a positive sum game, including the US.  That was because of the excess liquidity still being generated by a tapered QE, which ended at the end of 2014.  Starting from 2015, that is no longer the case.  No QE, no positive sum game.  The US stock market will not tolerate a stronger dollar any longer.  It can only tolerate that under a QE mechanism.  Which goes counter to the strong dollar theme.   If the EURUSD gets under 1.10, it will have temper tantrums and the stock vigilantes will put a gun to the Fed's head to do nothing, or if things get bad, a QE4.

Of course, the Fed is filled with cowards and will bow to the demands of the stock vigilantes, with no rate hikes if SPX stays below 2050, and another QE if SPX goes below 1800.

I am looking for a pullback today, with SPX 1990 in the cross hairs.

Bonds are a no play, rallying strongly on Friday and Monday, leaving no edge.