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M&A Signal Higher Stock Prices Ahead


While equity investors fret over the potential gloom and the range bound S&P 500, credit bulls are enjoying a huge boom.


Thank God it's Friday. Let's review the action that happened this week.

On Tuesday, we learned of BHP's (BHP) hostile bid for Potash (POT).

Yesterday morning, Intel (INTC) announced it was buying McAfee (MFE) for $7.68 billion.

After the close yesterday, First Niagara Financial Group (FNFG) said it was acquiring NewAlliance Bancshares (NAL), the biggest merger of US lenders since October 2008, according to Bloomberg.

Now this morning, we see Korea National Oil Corp making a bid for UK's Dana Petroleum, a potential $2.91 billion transaction.

Companies are sitting on top of almost $3 trillion in cash, according to Bloomberg, and the record $576 billion in deals announced in 2007 is in jeopardy.

Sure there are reasons to be bearish: unemployment, federal deficits, etc. But this strong M&A activity isn't a sign of a double-dip recession.

So while equity investors fret over the potential gloom and the range-bound S&P 500, credit bulls are enjoying a huge boom. It's just one ingredient in the recipe for higher stock prices ahead.

Below is the chart of the SPX courtesy of Professor Scott Redler of T3 Live. He's been great on maneuvering in and out of the current range. So bulls content with buying on the dip can look to the next area of small support at 1056. After that it's around 1020ish.

Click to enlarge

On a side note, I had an opportunity last night to see a clip of the upcoming movie Jackass 3D. It made me a bit queasy but looks pretty funny. Have a good weekend, everyone.

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No positions in stocks mentioned.

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