Italy And OPEC? Who Cares? 'Action' Speaks Louder Than Words

| About: SPDR S&P (SPY)

Summary

Even if Italy has the dreaded "no" vote the ECB is still in there hand over fist, day after day sopping up all sellers.

The ECB would love another bond rout because they could get to their stated goals of buying 80b euros worth of bonds per month.

Italy should be a serious risk event but the market seems to be yawning, maybe because of a giant friend in the ECB.

If bad news is good, a good jobs report Friday could be very good.

Action matters. Action is a term used by traders to say what should the market be doing versus what is it doing. Coming in Monday the market (NYSEARCA:SPY) was down with Europe. But Europe only went down Monday. If markets were worried about a "no" vote out of Italy, it should be down day after day. This says something else is going on more bullish.

Italy "Action" Says "No" to "No"

It seems to be a foregone conclusion that the resolution to refresh the Italy constitution will receive a "no" vote on Sunday. Most commentators and analysts predict that this will cause the meltdown of Italy and the EU banking system.

The stock market seems to be brushing it off.

If such forecasts were right with only a few days to go to calamity the market should be trading down into the event, especially in Europe.

Action is bullish versus negative news. But if the action going in is telling - the market will go up anyway on a "no" vote.

Sound familiar? Sounds similar to the Trump and Brexit "catastrophes" that the market soaked up.

What's With The Market? The ECB

The ECB has been coming out singing songs about risk.

They recently came out with a piece:

"Global Risk Repricing Endangers Financial Stability"

Ah, no biggie. Global financial calamity predicted by a leading central bank and markets are... up.

President Mario Draghi just said that due to low rates the real estate market has,

"Significant vulnerabilities"

Ah, no biggie, markets up anyway.

Why are markets not paying attention?

Because really what the ECB is saying is that they don't plan to slow their massive bond buying because if they were to stop they would destroy markets.

The ECB recently said it was "far too early" to discuss tapering.

So while you have risk of calamity, that is exactly what the ECB is here for. If bonds go down on risk, The ECB will be in buying.

They recently were reported to say if bonds are down in Italy after the vote the ECB will be in there buying.

We're never ever going to have to face any risk ever again. Things will get worse and worse and the ECB will keep buying and buying. That makes our job easy now because we never have to worry about anything anymore. Ah, the tranquility of the stock market (for now at least).

So far the ECB has come out worried about President-elect Trump, the EU and Italy. At one point before the rate jump the ECB was having trouble meeting their bond buying targets. Now they will have an easier time to meet their goals with rates higher, having more bonds meet their parameters. Higher rates are a good thing.

They are supporting markets right now.

Market Should Be Down On OPEC Too

We'll see what happens tomorrow in the conclusion of the OPEC meeting November 30th but for now it looks like OPEC will not agree.

Oil (NYSEARCA:USO) is down nicely yet the market didn't budge. Typically oil and the market move together but there seems to be a divergence.

The market holding and going higher on bad oil news is similar to the good action on bad Italy news.

Ok So It's All Bad, The Market Goes Up Anyway? No, We Have Good News With Jobs On Friday.

We wrote that Friday's jobs number should be better than October's report. It may be better than expectations. Jobless claims have shown a history of predicting non-farm payrolls. Jobless claims showed the most economic strength in 40 years two weeks ago. We expect a strong jobs number on Friday.

If bad news doesn't get the market down then good news should get the market up.

Elazar C'mon You Got All "Bear-ed Up"

True. We called the "Trump Rally" the morning after the elections and called the move back up on that dip ahead of elections. The day after the elections we went to the "sidelines." A week later we were all "bear-ed up."

So we caught some of the move but did miss some of this move.

But the action on terrible news, for us, for now, can't be ignored.

As underperforming hedge funds and managers see the market creeping up on bad news, when December 4th's Italy vote passes, they may need to all get in for the final 2016 close.

Conclusion

"Action" speaks louder than words. The market's action is saying more than all the prognosticators fear and gloom for now. That is bullish.

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