Submitted by Lance Roberts via RealInvestmentAdvice.com,
“The Bear Market Is Dead, Long Live The Bull.”
You could almost hear the chants from the always bullish biased media this week as the markets ripped higher on “first day of the month” portfolio rebalancing and short-covering by fund managers.
The rally, as discussed this past weekend, was not unexpected:
They are pulling out all the stops on this one...
Another chaotically wild week...
Today marked the 13th consecutive day of positive HY fund flows (bringing total to $8.6bn)...
But as Credit Suisse explains, the nature of this demand is 'different'...
Investors likely using the ETFs as a placeholder for cash in the absence of new supply, with HY issuance down ~74% year on year.
With ballooning ETF inflows the past few weeks, the liquid sector has become increasingly vulnerable to ETF cash rotating out upon the availability of new supply.
The last 3 weeks have been a near unprecedented rip higher in stocks... as markets anticipated G-20 cooperative actions (and then BoJ and ECB follow-through) creating a vicious short-squeeze bounce..
This has sent The McClellan Oscillator to its most overbought since January 2009...
What happened then?
US financials are tumbling after The Fed proposed a rule that would limit banks with $500 bln or more of assets from having net credit exposure to a “major counterparty” in excess of 15% of the lender’s tier 1 capital. Bloomberg reports that The Fed's governors plan to vote today on the proposal. The implications of this are significant in that it will force some banks to unwind exposures and delever against one another (most notably with potential affect the repo market which governs much of the liquidity transmission mechanisms).