Strong economic news is good news — or is it? Welcome to the QE2 Hall of Mirrors. With the election and Fed scenarios already priced in, economic news is the most important market mover.
We saw it Monday. Futures hit their lows for the morning as Personal Income for September was below expectations, but hit their highs at 10am ET as October ISM manufacturing (the first real economic number for the month) came in well above expectations.
On that, the Dow Transports became the first major index since April to hit a (intraday) 52-week high.
So why have we drifted lower? Europe had a rough close; that is the most obvious reason. But investors are also concerned that the strong manufacturing number we saw may cause the Fed to propose a smaller QE program than expected.
Regardless, most traders believe the combination of some QE, the election, AND seasonality will keep stocks from selling off dramatically, and if we get a small surprise with the October Nonfarm Payroll reports Friday (a gain of 60,000 jobs is expected)...we could punch through to new highs.
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