Dollar-Euro Breaks a Key Technical Point

Author Larry Berman

Posted: June 2 2012 re-posted from etfcm

The market shrugged off a few tape bombs yesterday in a break of a key technical point on dollar-euro (1.25) and the very weak consumer sentiment number. The strong close on a 90% upside breadth day looks promising, but weak volume in most sectors and financials specifically suggests there is not much conviction behind the buying.

There is little doubt the US looks mountains (of debt) better than Europe right now and it is bound to catch some money flow out of the euro as it leaves the region, but by no means is the economy healthy if we back out the artificial stimulus of the engineered yield curve. One example would be that bank profitability with a normalized yield curve would be 20-30% less at a minimum. And if corporate yields were not as low as they are, margins would be a good 10% lower in many companies as well. So take 20% off the $100+ in S&P earnings and the market is no longer cheap at 18x un-stimulated and un-sustainable normalized trailing earnings.



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