On December 15th, I posted “S&P 500 Fractal End-of-Range Signal” where I wrote:
“The market has been range-bound for this long because half of investors are thinking: ‘the economy is improving, so I should be buying stocks’, and the other half are thinking: ‘the wheels are coming off of Europe, so I should be selling stocks.'”
I predicted that the market would break out of its range within the next few weeks. Three weeks later, that’s exactly what happened. However, I didn’t predict which way it would break; only that the range was long in the tooth.
However, the next day, Joe Weisenthal at Business Insider posted this:
“Want to see a CLEAR sign that funding stress has eased in Europe? …this has a lot to do with the ECB’s actions that will allow banks to borrow money super-cheaply for 3 years and buy sovereign debt that’s yielding a lot more. If that’s the case, it’s working. Major shift here in the last few days/weeks.”
He totally nailed it. So, I hereby christen this rally as “The Great Joe Weisenthal Rally of 2012.”
Moral of the story: Don’t fight the Fed, or the ECB!
Next week, we get another LTRO operation from the ECB. So that’s a very big deal.