Something’s gotta give. Euro area liquidity is scarce (understatement).
Liquidity cannot continue to tighten like it is doing and the S&P500 not suffer.
But if the S&P500 doesn’t encounter a sell-off then it really is extremely well bid and will not only surpass its recent mid 1300 highs (hit a few times April to July 2011) but even higher. Watch for the response!
Now, for an eye-popping experience, check out some of the liquidity measures, including but not limited to these:
EUR BASIS SWAP 3 MO http://www.bloomberg.com/apps/quote?ticker=EUBSC:IND
USD SWAP SPREAD SEMI 2YR http://www.bloomberg.com/apps/quote?ticker=USSP2:IND
(I should post some screenshots, but time is pressing)
Meanwhile, the real global economy (as measured by official stats … yes, backward-looking, blah, blah, blah … they do have limitations, I know) continues to improve!
Check out the Citigroup Economic Surprise Index – Major Economies
The US is doing particularly well (OK, yeah, it isn’t, maybe relatively well is a better descriptor):
Citigroup Economic Surprise Index – United States
BUT, as Ambrose Evans-Pritchard (who is worth listening to as he is relatively sane, for a perma-bear) once said … something along these lines … “Credit is the ultimate fundamental” … so this ongoing and worsening liquidity squeeze is going to impact on the real economy. Nasty stuff.
This is a short-term traders market.