June 07, 2012 at 09:30 AM EDT
Dead Cat Bounce or An Important Bottom?
Thursday, June 7, 9:25 a.m. After losing another 470 points over the previous four days, the Dow has bounced back 312 points in two days. Global markets have followed the same pattern. Is it just another bounce off a short-term oversold condition or the end of the minor correction in the U.S.? For global markets [...]

Thursday, June 7, 9:25 a.m.

After losing another 470 points over the previous four days, the Dow has bounced back 312 points in two days. Global markets have followed the same pattern.

Is it just another bounce off a short-term oversold condition or the end of the minor correction in the U.S.?

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For global markets just another bounce off a short-term oversold condition or finally the end of the bear markets that began a year ago?

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Is hope without action really enough to overcome the serious global problems that have had many markets outside of the U.S. topped out since spring of last year?

Probably not. But promises of action soon from Fed Chairman Bernanke this morning could keep it going for awhile.

China’s central bank may have shown him how with its surprise announcement this morning of a 0.25% interest rate cut.

China’s market could use a boost. It’s one of the few that didn’t join in the global rally of the last two days. In fact, it has broken down from a triangle formation. The direction of a break from such a pattern usually indicates the next direction for awhile. Perhaps the just announced rate cut can rescue it.

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It appears that much depends on whether Chairman Bernanke will have encouraging words in his testimony this morning.

A Black Comedy?

From John Cassidy in Fortune magazine:

“From the U.S. the European debt crisis can seem like a black comedy populated by regional stereotypes: iron-fisted Anglo-Saxons, feckless Mediterraneans, the haughty Brussels bureaucrats. Closer to the action it isn’t funny at all. In the words of Mervyn King, governor of the Bank of England, Europe is “tearing itself apart with no obvious solution.”

Pending the second Greek election on June 17, it is hard to make predictions. Many commentators see a Greek exit from the euro as the precursor to a broader breakup. In Brussels some veterans argue the opposite. They say that once the euro family has ejected Greece, which has always been a problem child, it will come closer together and forge ahead.

Until now, my inclination has been that the Europeans would muddle through, with or without the Greeks. But for that to happen, the continent must find a way to kick-start growth. Austerity has failed miserably. Outside of Germany the continent is mired in recession . . . .”

Understanding How the Great Depression Happened!

Financial Times columnist Martin Wolf:

“Before now I had never really understood how the 1930’s could happen. [Watching the euro crisis] now I do. All one needs are fragile economies, a rigid monetary regime, intense debate over what must be done, widespread belief that suffering is good, myopic politicians, an inability to co-operate, and failure to stay ahead of events.”

To read my weekend newspaper column ‘The Time Has Come Mr. Bernanke’ click here.

Subscribers to Street Smart Report: A hotline from last evening, and the new issue of the newsletter from yesterday afternoon, are in the subscribers’ area of the Street Smart Report website. Please also stay tuned to the hotline!

Yesterday in the U.S. Market.

The U.S. market followed Asia and Europe to produce a big rally day. The Dow closed up 286 points, or 2.4%. 

The Dow closed up 286 points, or 2.4%. The S&P 500 closed up 2.3%. The NYSE Composite closed up 2.4%. The Nasdaq closed up 2.4%. The Nasdaq 100 closed up 2.4%. The Russell 2000 closed up 2.6%. The DJ Transportation Avg. closed up 3.0%. The DJ Utilities Avg closed up 1.2%.

Gold closed up $17 an ounce at $1,633.

Oil closed up $.80 a barrel at $85.09.

The U.S. dollar etf UUP closed down 0.8%.

The U.S. Treasury bond etf TLT closed down 2.0%.

Yesterday in European Markets.

European markets closed up sharply yesterday in spite of the disappointing lack of action from the ECB, and reports of unexpected declines in Germany’s industrial output. The London market closed up 2.4%. The German DAX closed up 2.1%. France’s CAC index closed up 2.4%.

Asian Markets closed sharply higher Tuesday night and last night.

The Asia Dow closed up 1.4% Tuesday night, and 1.4% again last night.

Among individual markets last night:

Australia closed up 1.3%. China closed down 0.7%. Hong Kong closed up 0.9%. India closed up 1.5%. Indonesia closed down 0.1%. Japan closed up 1.2%. Malaysia closed up 0.5%. New Zealand closed up 0.3%. South Korea returned from holidays to close up 2.6%. Singapore closed down 0.1%. Taiwan closed up 0.3%.

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Markets This Morning:

European markets are up strongly again this morning. The London FTSE is up 1.4%. The German DAX is up 1.4% this morning. France’s CAC is up 0.9%.

Oil is up $1.82 a barrel at $86.85.

Gold is down $6 an ounce at $1,627 an ounce.

This Morning in the U.S. Market:

This week is providing somewhat of a reprieve from potential market-moving economic reports. Only a few are due, including Factory Orders, the Fed’s Beige Book, and the ISM non-mfg Index. To see the full list and times for each release click here, and look at the left side of the page it takes you to.

Monday’s report was that Factory Orders fell 0.5% in April, versus the consensus forecast of economists for a rise of 0.1%.

Tuesday’s report was that the ISM non-mfg Index improved very fractionally from 53.5 in April to 53.7 in May.

Yesterday’s reports were that Productivity in the 1st quarter was revised to a decline of 0.9% from the previously reported 0.5% decline. And the Fed’s ‘’Beige book’ report was that the U.S. economy continued to grow at a “moderate” pace over the last two months, not indicating the Fed likely sees a need to come to the economy’s rescue yet. It was also reported that Germany’s industrial output fell 2.2% in April, more than double the consensus forecast of a decline of 1.0%.

This morning’s report was that new weekly unemployment claims declined by 12,000 to 377,000 last week, and the four-week moving average moved up some, by 1,750 to 377,750.

The closely watched item today will be Fed Chairman Bernanke’s report and testimony before the Joint Economic Committee at 10 a.m.

The pre-open indicators have been somewhat positive since last night and have become more so the closer we get to Bernanke’s testimony at 10 a.m.

Our Pre-Open Indicators:

Our pre-open indicators are pointing to the Dow being up 110 points or so in the early going.

To read my weekend newspaper column ‘The Time Has Come Mr. Bernanke’ click here.

Subscribers to Street Smart Report: In addition to the information in the premium area of this blog post, a hotline from last evening, and the new issue of the newsletter from yesterday afternoon, are in the subscribers’ area of the Street Smart Report website. Please also stay tuned to the hotline!

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