Dude, where’s my rally?
by Peter Switzer
We have been waiting for a Greek bailout deal for two years and 10 days, so what happened to the rally after the eurozone finance ministers said yes and found 130 billion euros for Greece?
Let’s think up clichéd or historical reasons for this lack of progress for stock prices in the face of great news out of Europe.
Well there’s the old chestnut of “buy the rumour, sell the fact". That has a lot of relevance as stocks have rocketed up since January as the Greek deal looked more likely. Yes and markets often buy on the rumour and sell-off after the rumour becomes a fact.
Then there’s the fact that the Dow went through the psychologically important 13,000-level overnight but like what often happens, the new level was tested. By the way, the Dow is into all-time high territory and considering what is going on in the world right now, and what is likely to happen in the first half of 2012, these very high levels on the index are a bit out there!
Of course, if I thought that anxiety over stocks was dissipating fast, I would be saying that cash hoarders will soon be stampeding into the market but I’m not thinking that right now. So the 13,000-level could be a real test.
Other reasons for the sluggish stock price effort were “it’s time for a retracement” and “it’s time for consolidation”.
The reality is that there are still plenty of headwinds left in Europe — that’s another cliché — but it’s a good argument.
For the record, the Dow was up 15.82 points to 12,965.69, while the S&P 500 was up 0.98 points to 1362.21. One break on the market’s rise was the price of crude oil, which spiked to over US$105.
I like the view of Madelynn Matlock of Huntington Asset Advisors in Cincinnati who told Bloomberg: “Stocks are still the only game in town, but when you reach a headline level, there’s always some fallback in the short-term. Having a deal in Greece means that at least in March we don’t have the prospect of a disorderly default facing us. Obviously, this doesn’t solve any long-term problems. On top of that, in a climate where nobody in the developed world has wonderful growth, the last thing you need is higher oil prices.”
The oil price was affected by Iran, which said it had stopped selling crude to France and Britain. A rising oil price could easily hurt the US consumer and that wouldn’t help the US recovery.
For those wondering what happened to the Greek debt deal rally, the answer probably is that we have already had it, so get over it. We now have to hope that good news can keep beating bad news if we want to see some higher stock prices.
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Published on: Wednesday, February 22, 2012
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