Top Line: With the rally on Tuesday, we can now say that the market is in the correction of the down move we saw since October. Our original estimate was that we would see the Dow challenge the 13,000 level. Right now we think that number should give the Dow some trouble but we will assess as we get closer to it.
There's really not much to say this evening, ok just joking on April Fool's evening. The stock market has found a way to go up and the bearishness is almost a memory. To be sure, it will be back before you know it but for now we will respect the current up move. The one problem with the move is the volume should have been a little stronger...
We repeat that the fundamentals don't really justify an uptrend but that doesn't stop the market in the short run. In the short run, the market got oversold and the public got a little bearish. Now, the market moves up a little and the world is scratching their collective head.
As we said, we are long term bearish but in the short run, we have to give the pass to the bulls. We couldn't dive in and go long but we did get out of our short positions last week, yes, a little later than we should have but we didn't have to endure this run up today.
There were some moves in the other markets that we should mention. First, the gold market was hit hard again on Tuesday as it was down nearly $40. Gold hit a high near $1,040 back on March 17th and now is down under $890. That's two weeks to drop about 15%. That's the way the commodities trade and we expect a further drop bringing it down a long ways. We are thinking that gold/silver or the mining stocks may present us a nice opportunity later in the year so we are keeping our eyes on it.
The Treasury bonds also got smashed with the long bond down nearly 2 points. This action is what the Fed has wanted to have happen for a while now. There are some buyers in the stock market, some sellers in gold and T bonds, and some interest in the US Dollar. Fed officials must be smiling. We recommend they enjoy the moment...there's more downside coming albeit a little while down the road.
FSI: 78.60 (solid performance from the speculating community)