Markets had big action last week which certainly looked like exhaustion selling. The technicals, while vastly improved for the 500index, are still lousy on the NQ100 side. Fed has answered the bell again for corporate accommodation although banks may have a tough time working any profits out of the flattening yield curve.
Today's rally action is a part of a story of a world where there is no big growth for business but stocks with dividends will provide at least a yield alternative to treasuries and other paper. Higher stock prices will not do much for the economy as in years past as the austerity frenzy provides fewer jobs. Corporations will continue to squeeze operations in order to be competitive as demand will remain lousy.
If there is a Euro bank disaster then US markets will be looking at momentum plays eroding prices to test the March 09 lows. Hiding from falling equities would lead to the zero rate Fed scenario.
