Bad news is good news for the markets that rely on central banks’ support--and so it proved again this morning’s as the latest European data disappointed expectations, yet the major stock indices rallied as if everything was just fine. The rationale is that weakness in data will ensure that the likes of the European Central Bank and the Bank of England will maintain their uber-dovish policy stance for longer. Their actions would keep bond yields depressed, underpinning higher yielding assets like equities.
Back in January, Ashraf Laidi alerted us to a strong sell signal in the euro currency based on the dead cross indicator. The indicator worked and provided those that followed it a successful short position that continued to pay dividends into May.