The TED Spread continues its steady rise, but failing to cross above 26.2. There may be a resistance to higher premiums until an unexpected event occurs. Euro-trash debt is being managed. The PIIGS are restless, but not squealing too loudly.
The US Treasury sent a press release with the subject "17 Community Banks Across the Country Receive $214 Million to Help Small Businesses Access Capital, Create New Jobs" speaks about $214 million provided to US Banks for the purposes of small business lending as part of the "Small Business Jobs Act." It continues saying $337 million in SBLF funding has been made available to date. Additional SBLF funding announcements will be made on a rolling basis in the weeks ahead.
In short, this means the Small Caps have been given a significant shot in the arm with cheap loans. This should goose the small caps to outperform the mid/large caps over the next two or three quarters. Since $214M (new)/$123M (previous) is a 173% increase, which may have contributed to a 6% YTD IWM increase, and a 37% 1-Year IWM increase, so a projection is a 10.4% IWM rise in the next 6 1/2 months, and a 64% forward 1-Year rise.
From the same press release "The State Small Business Credit Initiative (SSBCI), which is also a key part of the Small Business Jobs Act, allocates $1.5 billion to new and existing state programs that will leverage private financing to spur $15 billion in new lending to small businesses and small manufacturers. A total of 54 states and territories applied to take part in the SSBCI and 16 states have already had their applications approved for $570 million in SSBCI funding.
So if you thought $214M in new loans was good for Small Business, $1.5B is being spent to leverage 1:10 loans to small businesses for $15B in total funds available.
This legislation may instigate a small business bubble. Or at least an expansion of the economy and Wall Street into perceiving significant small business growth. Bank lending typically lays the foundation of many economic cycles.
In the meantime, the cost to protect your portfolio with a collar is still elevated. The CSFB still has potential to continue the existing range between 30 and 22. However, the market
US Debt Ceiling fear is a driving factor. Gold's new high confirms fear in the USD and US Treasuries. Baring a failure of Congress and the President to agree on a significant Debt Ceiling deal, the CSFB is poised to strike 30 and then decline as the new market trend sets in.
Watch the five day rate of change on the IWM and QQQ to spot the new trend when the CFSB hits near 30, or falls below 26. And follow in the direction of the rate of change.
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