Soft economic data is bullish for stock market

Soft economic data is bullish for stock market or high yielding assets or equivalent!

Huh? What kind of rubbish is this?

Yesterdays’ factory data and US private employment data came in weak. Coupled with previous weak economic data, the US stock market had risen 7 of the past eight trading session.

Huh, again!

Weak data capitulated global stocks markets to correction or bear markets territory in the month of August. How could weak data signal a strong stock market?

Here is my opinion. Have you heard of QE1 or QE2? As a result, US markets had risen more than 40% and 25% respectively, correct?

Who would recommend QE3 or equivalent on the table? Guess it right?

What are the criteria for QE3?

·         Weak economic data,

·         weak economy,

·         Global growth concerns, etc.

What is the difference between then and now? The difference is QE3 was not on the table then. There weren’t weak data, global growth concerns, weak stock market, capitulation, insufficient data, etc. We got it now and hence QE3 is a consideration.

While under consideration and weak data persists, the probability for QE3 or stimulus grows higher. Got it? Stock markets goes higher with a series of weak data!

If you are still concentrating on weak data and stand bearish, where do you stand now? You may have short positions and the markets are going against you. Once it reaches your critical point, if you still stand bearish and the market is going against you – short covering is the answer. And where does the stock market go? Further north!

In my opinion, the more weak data that is coming up, global speculators will be betting on a higher probability of a QE3 and vice versa. And the stock market goes further north!

Where do you want the stock markets to go next week? It really depends on how the data will be coming out this Friday – the Nonfarm payroll data and unemployment data!

Are you still bearish? Skeptical? Wait and see? Have you seen how HSI, BSESN, STI, KS11, etc compared to the third week of August?

What do you think fund managers would put their funds on the 1^st day of September after a terrible month of August? Reference is 2010 Sep 1^st report.

If you’re still puzzled, please do not hesitate to drop me a line/comment. If you like this post, share it by tweeting, Facebook or Google it. It would certainly reach a large audience. Thanks in advance! 

The only blog that had made brave speculation of

a market meltdown since May 2011

And a Buy call in mid August 2011!

Reference: Market trend PRE Jackson Hole