Despite all the negatives assoc. with the split-up of these monolines, the markets are going to get a big bid. The reason is very simple: The big institutions who underwrite the muni market have been deleveraging everything else in anticipation of a bond rating downgrade...which would have come if the insured debt stayed linked through ABK, et al. If that dngrde did materialize, the margin calls would have come, and regulators ande credit agencies would have pounded on the doors of Citi, UBS, Merrill, Lehman, etc. Those guys hold that stuff at 60-1 margin. And those markets were not trading. So, they've been proactive in reducing margin on everything else to avoid a firesale when the news came. Now it looks like that muni debt will be safe. We're seeing them start to expand back to preferred profiles in their other holdings, and we'll see a sustained bid over this week. My hope is that will get the weak hands back into the market on the longside and stretch the market beyond reason. If so, all you'll have to do sell exuberance into the next payrolls report. It was beginning to look like we have to grind the whole way, but plays in both directions will be nicely mapped to run for the next 3-6 weeks. Enjoy it..because the grind will return.
Fundamentals follow technicals. All macro reports will be interpreted as bullish if we rally 50-100 SPX.
No doubt about your first statement. But the net change is not everything. I see a market that will build an extradinary amount of short interest this week...and then see a big spike as it gets flushed right back out. A lot of people won't be able to rationalize the move. But if we get a real bad number, and the market is sitting at the tip of a short squeeze spike, it will look very bearish very quickly, and that will flush out the other side.