Vague talk about Monetary Actions in Europe Sparks Broad Three Day Rally

It started yesterday with Draghi saying that ECB actions are being proposed that would reduce bond yields  in Italy and Spain. Draghi will hold talks with Bundesbank President Jens Weidmann in the coming days with new “FED-like” measures such as bond purchases. Comments earlier this week about unwavering support of the Euro have taken the Euro/Dollar from the 1.20 level to a high of 1.239 today. And as macro traders know a Euro rally means an equity rally in the US. The two day rally has taken the S&P from 1337 to 1385 today and in zig-zag fashion up 4% for the month.

Overall today was interesting as light volume combined with macro ammunition brought out the MO brigade. As the cliche goes don’t fight the tape. Now don’t fight the FED (or ECB).

  • Amazon (AMZN $237.45) leveraged bad earnings news to boost stock  7% today on the premise that capital investments now will yield market dominance and improving margins later. With Amazon earnings metrics don’t matter because the Company can morph its business model in many directions: retail, cloud,and technology etc. Social networking and mobile can be talked up next. Amazon is the new cult stock as it can be anything you want it to be.
  • Large cap biotechs continued to run helped by Amgen (AMGN$82.85 up 4.5%) earnings beating estimates. Rayno Life Science favs went along up 2% or more: Alexion (ALXN $108.26),  Gilead(GILD $55.35), Illumina(ILMN $42.41),and Regeneron( REGN $137.28). The biotechnology sector is still not well known to most money managers and is less sensitive to metrics and macro bad news. But with good clinical news or positive earnings news,  institutions who own large positions can drive the stocks higher. The ETFs IBB and XBI add fuel to the fire as they are up over 30% YTD.
  • The 10 Year Yield rocketed up to 1.55%, Gold moved up $4 to $1624, and NAZDAQ was up a hefty 2.2% to 2957. Our recent new focus list BUY ThermoFisher (TMO $56) is up 2.45% today.
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