Something I have been considering from a bullish standpoint is that there are certain funds that have to remain 100% invested. These are the funds that helped fuel the bank, health care, utility, pharms rally. If the economy is slowing some of these plays may have peaked and they will be/are rotating out of them ... but not into cash because they cannot. Additionally, some aggessive (tech) growth funds, such as the Thurlow funds, (which is currently 60% cash) were waiting for the all clear signal. They have money to put to work. These like other funds, may have missed some of the downside, but cannot let the upside get away from them either .. so will probably be putting some money to work on any pullback this week. In short, the action may get choppy, and stocks that had major moves last week may pull back some, but I believe there has been a trend change and the 4200 level that many are looking for is very achievable in the near term.
As for the dollar weakening ... what did everyone expect if the chance of ongoing rate increases may no longer be in the cards (especially with Euro rates likely to be increased)...... as long as it doesn't get out of hand its actually a good thing for the market. Whilst there may be some foreign money moved out of the US equity market, the domestic multinational companies that were looking at negative exchange effects on their P&L will be happier. And whilst it may take time, its also a positive for the balance of payments ... and trade deficit (albeit there won't be an immediate effect).
Nope .. I can see old Uncle Al, lying in bed at night in his 'A' Team nightshirt, muttering ... "I love it when a plan comes together" .....
Stephen
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