Ofter trading higher overnight, the Dow opened up 12 points, and is now trading up 27 at 12246, and the SPX is also trading higher, up 1.92 at 1315. All the other major indexes are also trading higher. After printing some very negative numbers for new home sales and existing home sale last week, this week it is reported that Pending New Home sales are up unexpectedly, printing plus 2.1% vs expectations of minus 1% The Commerce Department says spending rose 0.7% after a 0.3% gains in January. Personal income declined from a 1.2% gain in January to 0.3, less than expected. U.S. consumers had to dip into savings to spend that money. Which is why saving shows a declined to 5.8 of Personal Income, from 6.1% in January.
Goldman Sachs again warns that first quarter GDP is likely to decline from the expected 3.5% gain to something more like 1.75% to 2%, which would be a significant miss of consensus estimates. The Dallas Fed has reported their diffusion index, printing at 11.5 and missing expectations of 18%, another significant miss. Of course, Mr Market ignored the news. When Mr Market wants to go higher, nothing gets in the way. Deeper into the report, we learn that margins are under pressure, and that expectations for future wages and benefits to be lower, and input costs to be higher. Of course, CapEx is also expected to be nil as Corporations continue to sit on their cash pile.
Oil is lower this morning, trading 104.5 while Brent is higher at 115.52. Gold and Silver are lower, Gold at 1416.7 and Silver at 36.82. Copper is also lower, as we are stopped out of our JJC this morning on the open. The entire commodity complex is lower with the exception of Beans, which are up 0.17%. In Europe, with the Portuguese government in chaos, the Irish now demanding that Banks take a haircut on the ready-to-default Irish debt, and 250,000 Englishmen demonstrating in the streets against austerity, and the German Government taking another hit in regional voting, it is no wonder that the Euro is trading higher at 1.410 and the Dollar lower at 76.08. Ya, sure!
The Yen is also lower, at 81.69. I read a story over the weekend that most clearly explains why the currency of a government that has experienced a devastating earthquake and Tsunami and the worst nuclear accident in 25 years would see their currency advance against world currencies. The government forces domestic insurers and re-insurers to be responsible for a major share of any disaster, therefore Japanese insurance companies have huge reserves invested the world over in stocks and bonds. To begin to have the kinds of liquidity that will be necessary to fund the damage claims and rebuilding, the insurers will have to sell some of those assets. When they sell those assets, dominated in lets say Euros, they will then have to convert those Euros into Yen in order to bring that cash back into Japan. In other words, the insurers will be huge buyers of Yen as they re-repatriate there investments.
The Proprietary Momentum Change indicators are still on the Buy signal generated last Wed. We got stopped out on the JJC (the Copper ETF) this morning at 57.85 for 1.05 loss. The rest of the positions are still active, and you will note that I tightened the stop loss prices on Friday. I suspect we may get a breather shortly, and there is of course always the possibility that some of the stops will get triggered. But if that does happen, we will be looking for a re-entry point. The market timing indicators that I have used for a long time, and which have been a little less that perfect for the past several months, are looking for an end to this rally in the late May, early June period. The market should experience relative strength into the top period, although it is likely we will get some trading experiences as we move through the next few weeks.
Best To Your Trading!
Bill
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