Dow Back Above 13,000 July 27 2012 But Will There Be Follow Through? TLT Suggests – Yes:
The Dow Jones Industrial Average jumped over 200 points Friday to conclude the best 3 day rally of the year. The Dow didn’t keep all of its gains but finished the day at 13,075 up 187 points. U.S. equities rose even with horrid GDP numbers that suggest the economy is in decline. Second quarter 2012 GDP came in at 1.5 percent after a revision for the first quarter of 2.0 percent. The downward rate of growth suggests the economy is contracting faster than anticipated earlier in the year.
U.S. equities rose last week based on strong statements from abroad about keeping the EU together and it’s possible the euro zone will begin buying debt from member countries, could create their own central bank and begin floating eurobonds. If downward pressure on the euro continues, Germany may decide to capitulate as they have done in the past and could signal they are willing to do whatever is necessary as Mario Draghi noted last week.
More On TLT And The Bond Bubble
The 20 year U.S. Treasury Note fell sharply as we predicted before an article appeared in Barron’s yesterday mentioning the TLT directly which was a tech analysis feature of this website on Friday. This trade could get crowded in the short run and investors should reevaluate after price movements next week. This site is the first to mention the TLT and an associated bond bubble here and on social networks @torycapital @celestichukumba and a crowded trade can easily change direction in the short run. We predicted more attention would come to TLT on our tech website Abmuku.com Friday where we discussed Google’s Panda 3.9 update and algorithm inefficiencies.
We are bullish on equities and would not short the S&P 500 medium run while the Dow has initially jumped above several key technical levels. Expect some retests after the quick rally next week which would allow the S&P 500 to hit new multi-year highs.
DOW 13075.66 187.73 +1.46%
NASDAQ 2958.09 64.84 +2.24%
S&P 500 1385.97 25.95 +1.91%