Sunday, April 29, 2007

A New Week and A New Month

Market Action:
On Friday morning, the market saw a surprisingly weak preliminary GDP number for first quarter. GDP came in at 1.3% compared to 2.5% the prior quarter and 1.8% expected. The important number was the deflator and that was up 4.0% compared to 3.2% expected and last quarter’s 1.7% figure. The deflator is a good estimate of inflation and we like to see how the GDP has been without the deflator just to get some idea of how the economy looked on a gross basis.

The first quarter estimate of 1.3% with a 4.0% estimator gives us about a 5.3% nominal growth number. This compares with last quarter’s 4.2%, found by adding the 2.5% GDP to the 1.7% deflator. You can see that the nominal rate is a bit higher in the most recent quarter. The market focused on both deflator and the weak net GDP number, for about 20 minutes and then found a way to trade up. Truly, there was very little action to discuss except that we did see another up day in the Dow.

With the end of the month finally here, we are hoping to see a near term pull back in the Dow as well as the broader market. The pattern of the market has taken on some different interpretations and we need to watch what happens this week for further signs as to what is going to happen. It is possible that the highs late last week could be a short term high or we could have a little higher high but not much from here.

We see that there are several big news items from the economy that may have some effect on trading. The big one we are interested in is the jobs report due on Friday morning before the bell. It would fit nicely with a significant high in the Dow at the same time. We have this sitting on the back burner but we wouldn’t be surprised if the Dow could eke out another weakly up week.

In the News This Week:
Monday—Personal income and spending
Monday—Chicago PMI (Purchasing Managers’ Index)
Monday—Construction spending
Tuesday—March Pending home sales
Tuesday—April ISM Manufacturing index
Thursday—First quarter productivity and labor costs
Thursday—April ISM Non-manufacturing (services) index
Friday—April Jobs’ Report

This month’s Mantra: “Sell in May and Go Away”

Dow Industrials: 13,120.94 +15.44 (19 up out of 21)
VIX: 12.45
HUI: 344.83
QQQQ: 46.57
QQQRS: 0.45 bid
QQQRT: 0.70 bid
RYVNX: 15.21
RYAIX: 20.43
RYCWX: 32.60
TLT: 87.83
BEGBX: 14.02

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