Today the S&P 500 breaks out over the range that it has been during the last two months and a half. The market reach 1236 points, its highest level since August 4, 2011
The next target for the S&P 500 is 1260 points, March and June support from where the market bounced.
What drives optimism today in the markets are two rumors:
Ben Bernanke gathered with some senators to discuss the posibility of a new montery stimulus to bolster the weak economy.
The FED wants to monetize mortgage backed securities, something that was done during the first QE during 2009 and 2010, in order to stimulate the weak real estate and housing sector in the US.
More liquidity is taken as a big positive for stocks, commodities and most financial markets.
The Dollar Index falls sharply lower today with this rumor.
The other rumoer that generated optimism and rallied the European stock markets was that there is a supposed agreement on giving bailout funds to Greece and how to lever up the ESFS bailout fund.
We have heard this rumor and plans before many times and the supposed solution will be released during the weekend and early next week.
Although there are some setups that look good, I personally find it hard to chase the market higher in a rumor filled environment and with a very grim long term macro picture.
We might initiate some positions to play this break out but they will be smaller in size and with tighter stops.