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T3’s Take 3: Banks Smash Those Put Lovin’ Bears

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1) Thank You 

Bank of Japan Governor Kuroda told Bloomberg News today that the bank would maintain its current pace of asset purchases for some time.

Kuroda added that the BoJ isn’t even close to hitting its 2% inflation goal.

The news sent the yen — a key safety asset — down sharply, which in turn pushed up the US dollar and other risk assets.

US Treasury bonds dipped today, along with gold, silver, and utilities stocks.

Europe also finished positive, with France’s CAC 40 up 1.5% headed into this weekend’s pivotal Presidential election.

The polls indicate that Marine Le Pen is unlikely to win the eventual runoff in May… but after the Brexit, President Trump’s win, and Italy’s ‘No Vote’, never say never.

We’ll find out soon enough if the polls are as wrong as they were when Trump won.

2) Market Rips

For the past 2 weeks, traders have been very bearish, aggressively buying put options.

They’re now paying for doubting the bull.

The strength in the dollar plus an earnings beat from American Express (EXP) gave a huge boost to financial stocks, which have been selling off since bank earnings kicked off last Thursday.

Even the names that beat expectations, like JP Morgan (JPM) and Bank of America (BAC), hadn’t been able to catch a bid.

But that changed today, with the S&P Financials ETF (XLF) rising a solid 1.7%.

The wild regional banks (KRE) did even better with a 2.1% pop.

Aside from the bank strength, traders were encouraged by Treasury Secretary Steve Mnuchin’s comments at the 2017 IIF Washington Policy Summit, where he said ‘major tax reform’ is close.

I found that strange, since just days ago, Mnuchin himself said releasing a plan by August would be unrealistic.

And just yesterday, House Speaker Paul Ryan hinted that it could be a ways off.

Anyway…

The S&P 500 rose 0.8% to 2355.92, with the Nasdaq up 0.9% and the Russell 2000 up 1.2%.

Even energy stocks had a nice bounce, despite crude oil declining further from yesterday’s 4% drop.

3) More Strength to Come?

This afternoon, my good friend Scott Redler issued analysis of the SPX following the morning breakout.

According to Scott, trader should have been watching for a close above the 2352 – 2355 area.

That’s a level that could drive a bigger squeeze and cause money managers to get more aggressively long.

With the market closing above Scott’s targeted range, more strength could be on the way.

Click here to read Scott’s article, which also includes a chart breakdown of Apple (AAPL).

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