Welcome to the US Stock Market, Where the Points are Made up and Data Doesn't Matter!

A widely anticipated set of data was released today in the form of the ISM manufacturing gauge. The ISM manufacturing gauge is an index of surveys of more than 300 manufacturing firms, monitoring employment, production inventories, new orders and supplier deliveries. When the ISM index increases, the stock market should follow as there is likely an increase for corporate gains. The bond markets work on the opposite notion, decreasing as the ISM index increases due to the potential inflation. 

Well, the ISM index came in well below expectations, 49.0%. This was well below the April numbers (50.7%), expectations of 51%  and the lowest in four months. So what happens? The stock market closes with triple digit gains, of course! Although initially it looks like exactly the opposite of what you would expect, it has to be taken into consideration the current dominating factors in the global economy. The slide in global equities has been attributed to the US Fed speakers conflicting views regarding when exactly the QE program should be ended. Some Fed officials think the program should have already been tapered, where others, notably Bernanke, haven't given any solid hints as to when the tapering will begin.

The disjointed remarks about the tapering initially sparked investors to close longs and overall put the market into sideways movement, but the recent poor data from the ISM index reaffirmed the probability that the Fed will not be tapering QE in the next two months, causing a minor rally that resulted in triple digit gains.Weakness in growth for the US is likely to continue well into the second quarter, as GDP is forecasted to drop to 1.9% from 2.4% in the first quarter. Weakness appeared in almost every area of the ISM report as the new-orders gauge and production index slumped, along with less industries posting positive gains. Other areas of the US are doing better, however, as the housing market is showing signs of strength and US consumer confidence is at the highest point in five years.

All in all, the title is meant to be a joke, it's a reference to Whose Line is it Anyway?, but the overall point remains the same. If the global equities market is indeed experiencing a bubble, it is massive. I'm not quite sure where to draw the line though, it is definitely propped up by the exorbitant QE spending every month but is it truly a bubble? One concern of mine is that people support the bulls in the most recent rally, saying that bad news is good news since it supports the QE mandate. What happens then when the market is no longer propped up? We saw a spike in the US ten-year bond yields after a mentioning of the possibility of tapering, I fear what the response of smart money, and then after that, the common investors, will be once it is indeed confirmed!