Which Way Wednesday – Russell Drops and Dow Pops

The Dow zoomed up to 14,662 yesterday while the Russell failed the 940 line and fell all the way back to 934.  I had told our Members to watch the 1,570 line on the S&P at 11:28 in yesterday's chat and that's EXACLY where we finished for the day – gotta love that 5% Rule…

As Dave Fry notes this morning, a lot of our "good" news lately is misinterpreted, like Auto Sales up but mainly due to massive growth in sub-prime auto lending. which in turn drains spending Dollars away from other parts of the economy down the road.   

Student loans are already in their own bubble and, as I mentioned yesterday, Retail Sales were distorted by the Holiday.  Europe is a data disaster but the markets over there (and over here) don't seem to care.  

Eurozone unemployment soared to 12%, and ISM data collectively remains weak (46.8 vs 47.9). Data from France, Spain and Italy were even worse.  But, stocks in the region jumped for no pronounced reason that anyone could tell other than, as Dave points out, QE and ZIRP effects on markets. There will be more about this Wednesday as the ECB meets to discuss conditions and monetary policies.  Below is a chart comparison showing the disconnect between Eurozone macro economic data and stock prices from ZeroHedge:

If you follow the link, you'll see how we're getting some massive disconnects now across the globe as data has taken a serious downturn in the past 30 days but the indexes have plowed ever higher – just like they did in 2007 – the last time we made these market highs.  Of course rallies don't usually just vanish in a puff of smoke (or a flash crash) but we're seeing enough signs of weakness to keep us cautious and S&P 1,570 is the straw that breaks our bullish backs at the moment.  We're already too bearish but, as I said to Members yesterday, I'd damned well be doubling down on Dow puts if we weren't and, this morning, we took advantage of the 14,600 line in Dow Futures to get a little more short in the morning and it's already paid for our Egg McMuffins – as well as giving us piece of mind. 

IN PROGRESS