Sunday, May 13, 2007

Flat PPI Leads to Market Rally

Market Action:
Stock traders thought about what the Fed had said on Wednesday about inflation being the biggest concern on their minds and with the flat PPI decided that it was time to buy (this report was for "core" PPI with expectation of a 0.2% increase). After all, the correction was over, you remember, the one on Thursday. On top of that, retail sales were disappointing which should also be considered a bullish thing, just because the Fed can maybe, just maybe, lower rates soon.

Whatever the reason for the early up in stocks, it managed to carry for the day as the market went out on its highs for the day even though it didn’t manage to totally erase Thursday’s losses. That job looks to be for Monday morning based on the futures this evening, not to mention the huge move in Asia; Hong Kong is up over 2%.

Our opinion section has a hole in it this evening—there is not much to say about the market this evening. Monday’s trade will be important as we watch to see if last Wednesday’s highs can be broken to the upside. We obviously do not prefer that outcome based on our leveraged short position but it could happen. The market remains overbought and sentiment is running so bullish that no one can believe there will ever be a market correction again—huh?

News for the Upcoming week:
Wednesday—housing starts and building permits
Thursday—LEI, leading economic indicators
(This includes the stock market, so could be stronger than expected.)
Earnings news—Wal-Mart on Tuesday

Dow Industrials: 13,326.22 +111.09
VIX: 12.95
HUI: 337.84
QQQQ: 46.78
QQQRS: 0.30 bid
QQQRT: 0.51 bid
RYVNX: 15.12
RYAIX: 20.40
RYCWX: 31.61
TLT: 88.19
BEGBX: 13.94

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