After being higher overnight, markets gaped higher on the open, with the Dow currently up 59 and the SPX up 6.5. All of the other major indexes are also higher, after trading in Asian and European markets ended higher. Fundamentally, it would seem the concerns about Irish, Portuguese and Greek sovereign debt would be enough to generate selling in the Euro, but the selling has been modest. In addition, the governing coalition in Germany is suffering big losses in regional voting, potentially making it much harder for the German government to continue to backstop the Euro. After hitting its recent highs above 1.42, the Euro has been steadily declining, currently trading at 1.407. This weakness in the Euro is finally translating into modest strength in the Dollar, which is today trading at 76.25
Oil is slightly lower this morning at 104.38 and Brent is slightly higher at 115.35. Gold is higher at 1427.4 and Silver is higher at 37.65. Copper is off a little, at 4.328. Mr Copper does not seem to want to lead the markets in this rally. The balance of the commodity is mostly higher, most less than 0.25%.
The 10 Year Note is higher at 3.48% while the long Bond is slightly lower, trading at 4.55%
The big news domestically is the ADP payroll report, which has printed 200,300 new Jobs. Commentators seem pleased that most of the new jobs were created in the service sector.... not sure why they would be pleased to see fast food servers and retail clerks dominating the new job creation, but seems to be the take-a-way. This ADP report is expected to foretell a good BLS new jobs report on Friday. Hopefully, there will be no surprises like last month when the BLS report was a big miss of expectations.
Another report that is likely to have a greater impact on the markets is the continuing buzz that 1st quarter GDP, currently projected by consensus estimates to print at 4% may in fact come in much lower. The Fed Macroeconomic advisers has lowed its 1st quarter projection from 4% growth to 2.3%. I saw a story yesterday, purporting to be a Goldman leak, that they are about to revise their 1st quarter estimates downward to 1.75% to 2%. With the slowing of growth expectations for the economy and the continuing reality of higher input costs in manufacturing and the resultant margin squeeze, it would not be unusual that investors begin to change their minds about earnings per share and PE ratios,
I did not even point out that the free money injections of QE2 POMO is due to end in June and it would not be unreasonable to expect that stock prices will come under pressure. As my wife likes to say.. .Ya Think?
For the time being, we are Bullish on the short term, with the Buy signal generated by the Proprietary Momentum Change indicators 2-23 still in effect. Please note that there have been some changes to the stop loss prices added to the trades at the right.
Best to Your Trading!
Bill
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