Good News Catches Bears Off-Guard

 |  Includes: DIA, EUFN, GLD, QQQ, SPY
by: Global Investing Editor

Just as some Elliott or Kondratieff wave theorists predicted the Dow would fall to 1000 and we should to take to the hills with gold coins and machine guns, the bearish gloom-mongers were caught by good news.

The International Monetary Fund late Wednesday increased its 2010 world growth outlook to 4.6% reflecting a stronger-than-expected H1. Its earlier estimate was for 4.2% growth, made in April. That would be the biggest rise in 3 years. Growth in 2011 is projected to be 4.3%, the same as the April forecast.

Then Wednesday the U.S. Dept. of Labor data showed that 21,000 fewer Americans applied for jobless benefits last week (to July 3). That is still 454,000 unemployed people.

European banks are up on an assumption they will pass their not-very-demanding “stress” tests. And perhaps because shareholders are happy that new rules will cut instant bonuses by 70-80%, alligning executives' interests more closely with theirs. Even the embattled euro is up, to $1.27.

German figures showed that imports had risen by a whopping 14.8% sequentially in May, while exports only grew 9.2%. The German trade surpluse narrowed to a mere 10.6 bn euros for the month, well below forecasts.

And as for gold, it now turns out that rather than being a beneficiacy from the printing press at central banks, the yellow metal also was a support for their profligacy. CB swaps with the central banks' central bank, the Basel-based Bank for International Settlements (reported in its latest annual report to end Mar.) helped them monetarise their gold hoards. The BIS acted as a pawnshop, although so far there have been no revelations that it actually sold any of the 346 metric tonnes of gold placed with it.