Market gains are just beginning
A better-than-expected deal out of the eagerly awaited eurozone summit has kicked off what could become a long rally.
Finally, Germany cedes a little, and markets go crazy. European leaders agreed to take steps toward closer budgetary controls and tighter political union. Moreover, in a victory for Europe's Latin Bloc, German Chancellor Angela Merkel opened to using bailout funds to directly recapitalize banks and to purchase sovereign bonds in the open market.
This is huge step forward, and markets are responding accordingly. By all indications, the gains are just getting started ahead of what could be a multimonth advance before worries over America's "fiscal cliff" -- tax hikes and spending cuts worth about 5% of GDP due to hit in early 2013 -- cause new weakness. Here's how to play it.
As I previewed in my column this week, Merkel realized that her constant recalcitrance against any fresh steps to ease the eurozone crisis (moves toward liability sharing via Eurobonds or a banking union) was quickly spiraling out of control. Spanish and Italian borrowing costs were reaching unsustainable levels. And political cohesion was beginning to fray, with Spanish and Italian leaders threatening to veto a new $150 billion growth package if there was a lack of progress on these issues.
So the outcome from the summit -- which was the 19th meeting in two years -- was very, very good. This follows a good outcome from the Greek election and fresh stimulus measures by the European Central Bank (relaxation of collateral requirements).
With investor sentiment so negative heading into this meeting, people have been taken by surprise. Friday's market action demonstrated this with huge, gapped moves higher in key assets. Small caps. Emerging-market stocks. Crude oil. Copper. Precious metals. They all moved by leaps and bounds.
Technically, it's all systems go for a fast-moving rally led by foreign stocks, financial issues and commodities. Breadth has been improving steadily as more and more stocks participate in the upside while fewer and fewer participate in the declines. Deflationary expectations are easing in the bond market, which is a good thing that will suck money out of Treasury bonds and put it into stocks and gold.
And the dollar -- on which so much of the market moves, as computer-trading algorithms use the euro-dollar exchange rate as a measure of risk appetites -- got absolutely pummeled, resulting in a cascade of short-euro, long-dollar trade covering. For the bears, it's a terrible day.
I'm looking for this advance to continue into August as eurozone progress and central bank stimulus fuel another ride higher, as I discussed in my column last week.
The leveraged ETF positions in the Edge Letter Sample Portfolio were well positioned for Friday's rise. Both the Direxion 3x Emerging Markets (EDC) and the Direxion 3x Semiconductor Bull (SOXL) are posting 10% gains. New position Synovus Financial (SNV) is also doing well, up 6% since I added it on Wednesday.
I found both SAN and SLT with the help of technical screens developed with Fidelity's Wealth Lab Pro back-testing tools, which you can find here. (Fidelity sponsors the Investor Pro section on MSN Money.)
Check out Anthony's investment advisory service The Edge. A two-week free trial has been extended to MSN Money readers. Click here to sign up. Contact Anthony at email@example.com and follow him on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
They rally is coming!
You are either with it... Or you are against us, I mean it.
There is no in between!
Remember Barney Fife from Mayberry? It's a r-r-rally Andy! Really it is!
Quit gettin everyone fifed up now, Barney.
All Hype. It doesn't even matter if the situation is calmed anymore. The economic landscape has been changed indefinite. Someone has to pay the bill. Wait for one hair to fall out of place. They'll all be running for the hill.
Cramer! Cramer! Cramer!
Find out what Anthony drinks and order me a case.
But . . . no. There is no Anthony. Just an old Disney audioanimatronic statue with a big nose.
Screw this. Let's all meet up in Nashville and hit the live music taverns. Out on the honkey tonk. I'm buying!
So why is it that today, when Italy and Spain are looking at that level of interest on their loans, it is termed 'unsustainable'.(Especially when interest paid on savings is what -- .1%? Somebody's picking up around 6.9%, therefore, rather than 2-4% difference from savings.
I think I call BS.
Stocks will rise 20% by the end of 2013.
Ride the bull!
Be genetically different!!!!
The reasoning is simple. The dow went up 275 points or so today based on speculation that the currency of both the Euro and Dollar are going to be debased. That's also why gold jumped 3.5 percent.
It is logical that both assets, which is what a stock is suppose to represent, and Gold or hedge commodities, which is what gold represents, should boost when the currency is expected to be inflated.
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