The big news this week was another ECB LTRO totaling over 500 billion euros and making the total for the two offerings just over one trillion euros. This is another “kick the can” move to stop the liquidity pressure on European banks. It represents more of the bankrupt thinking that believes you can solve a solvency problem with debt.
As this kind of gross tampering persists, unintended consequences surely surface. In our case, we are now seeing higher oil and gas prices raise their ugly head again. The immediate fallout from high gas prices is to raise the bar further inhibiting further Federal Reserve QE and depress the economy.
Investor sentiment this past week remained very bullish with the numbers moving a little more extreme in that direction. In spite of this sentiment and a very low VXO (fear index), contrarian Adam Hamilton remains strongly bullish looking for an S&P 500 Index objective in the 1500 range. Technician Katie Stockton appeared on CNBC projecting a pullback in the S&P 500 Index to 1300. She sees that followed by a breakout above 1370 to a 1440 objective.
I tend to agree with Dr. John Hussman that this is another false-hope rally on low volume lacking conviction and foundation. Buyer beware.
