Why did we rally today? I'm sorry to sound simplistic, but it's really because it's calm in Europe: there are no headlines.
Conditions remain oversold—there's been negligible returns in bonds, so stocks look more attractive.
And don't get too excited: volume is light, so no one is chasing the market here.
The leadership is utilities, the classic high-dividend play.
Long run, two factors are in play: 1) traders believe some form of tighter fiscal union is coming from Europe, and 2) there are expectations that some form of QE3 will still be forthcoming.
"If I'm underwater in equities just hold on to I get bailed out by QE3 before the NFL kickoff," one trader wrote, summarizing the sentiment of many on the street.
Pay attention to July CPI and PPI, out this Wednesday and Thursday. PPI and CPI both had their first monthly decline in June, the first monthly decline since June 2010. Weak numbers would provide cover for the Fed.
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