8/6/12 3:23 PM – It’s All Good

Lots of green today as the US followed the European lead. Art Cashin of UBS says there is a massive short squeeze on the Euro, pushing the Euro higher. As the Euro goes, typically so go stocks and other risk assets.

Stocks at a bit after 3:00 were up .5 – 1%, depending on the index. Bonds were up, gold is up 0.6%, oil is up 1%.

Big bank stocks are doing especially well. Citigroup is up over 4% while Morgan Stanley and BofA are up about 3%.

Stocks are only 1.5% below their earlier high for the year set near the end of March before we started getting poor economic reports. There may be enough gas left in the tank for a push above the old highs. If we don’t go significantly above them and then decline significantly that would be a double top in stocks that would not bode well.

So far, so good, though, even in spite of the very misunderstood jobs report Friday (see my comments for Friday) and the very lackluster economic reports.

Traders are probably looking at 4 potential positives:
A Fed announcement of more QE either at Jackson Hole 8/31 or the Fed meeting in Sept.
The ECB is working on ways to buy Spanish and Italian debt with the blessing of Germany. Good luck with that.
A drop in yields for Spanish and Italian debt since last week, mainly in anticipation of #2
Hope for a repeat of 2010 and 2011 when a very poor April-July period turned into a very good Aug-Dec