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This is a classic consolidation day in the markets with extremely light volume. The markets are now waiting for the Friday Unemployment Report and Non Farm Payrolls. Today the ADP Private Sector Employment data was released showing a solid gain for 187,000. However, this number does not always dictate a strong Non Farm Payrolls number as the market found out last month. After a great ADP number last month, the Non Farm Payrolls were poor. This surprised the market slightly but did not cause a major sell off.
Look for light volume to continue until Friday morning. The markets will most likely stay quiet and neutral. In addition, keep a close ear to the Egyptian situation as a worsening could have a negative impact on the U.S. markets. This would occur as investors would run for cover in the Dollar. A higher Dollar would cause the markets to drop. In addition, gold and oil would move higher. To get more hardcore, no hype analysis, swing trades and education, join the Research Center. Take a free trial.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
Iceland Proves Ireland Did `Wrong Things’ Sacrificing Taxpayers:
Today, Iceland is recovering. The three new banks had combined profit of $309 million in the first nine months of 2010. GDP grew for the first time in two years in the third quarter, by 1.2 percent, inflation is down to 1.8 percent and the cost of insuring government debt has tumbled 80 percent. Stores in Reykjavik were filled with Christmas shoppers in early December, and bank branches were crowded with customers.
http://krugman.blogs.nytimes.com/2011/02/01/bloomberg-on-the-icelandic-miracle/
Today's rally is impressive by all standards. The rally is broad based as all sectors are trading higher across the board. Semi's, energy, retail, financial stocks and most every other industry group are trading sharply higher today. Is there any negative to this stock market surge to new highs? Ah, the small negative to today's rally is the volume. On January 28, 2011 the SPY sold off on 300 million shares. That is real selling pressure, however, today's rally the SPY is trading just 150 millions shares as of 4:00 pm EST. This reminds me of the old Wendy's restaurant commercial in the early 1980's when an old lady says, "where is the beef?" Light volume does not mean that the market cannot go higher. It just means that when the selling pressure does come into the market the downside could be sharp.
The markets are being shot higher by key stocks like Exxon Mobil Corporation (NYSE:XOM). XOM is trading at $83.12, +2.44 (+3.02%). This is a monster move in XOM and a new 52 week high. Just yesterday, XOM reported stellar earnings. All sectors are moving higher on this broad based rally. JPMorgan Chase & Co. (NYSE:JPM) dramatically helping the markets today, trading at $45.80, +0.86 (+1.91%).
The bottom line is this, as long as control is maintained by the Federal Reserve through a weaker Dollar and light volume, the markets will have only minor pullbacks. If something erupts globally, that threatens stability, the markets will drop sharply. The key will be is the global disruption viewed as a short term minor issue like Egypt for now, or a bigger issue. This will be the one factor that will cause a major drop in the markets or just a minor one day event. To gain more insight, market guidance, analysis, swing trades and education, join the Research Center. Take the free trial now.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
To the Federal Reserve Bank's credit it has worked as everything has inflated higher. The people that are employed and have jobs are also feeling better because their retirement accounts have bounced back up. When people feel better they will spend money. It is important to note that consumer spending accounts for 70.0 percent of the gross domestic product in the United States. Can quantitative easing actually work if people start feel better?
There are a few problems with inflating the markets higher by creating cash reserves. The first problem is the high inflation that it creates around the world. Every emerging market is now facing high inflation. People in the United States can see how much more they are paying for food and energy. The other problem is that unemployment is still near 10.0 percent according to government standards. There are also a lot of people on food stamps or as we now say, government assistance. It is estimated that over 43 million people are on food stamps. Food riots have also broken out around the world in various nations. Rice, wheat, cotton, coffee, and many other commodities are soaring higher on a daily basis. The iPath Dow Jones-UBS Commodity Index Total Return ETN(NYSE:DJP) is trading at a new two year high. The iPath Dow Jones-UBS Cotton Subindex Total Return ETN(NYSE:BAL) is trading at a new all time high. Can these high prices be beneficial for the economies in the United States and around the world?
This morning the U.S. Dollar Index has declined lower again by 0.34 cents to $77.38. The purchasing power of those that use dollars have diminished again. Well, just about every commodity in the world is traded in U.S. Dollars. Every person that lives in America has just about every asset that they own denominated in U.S. Dollars. How can a rising stock market and a falling dollar be viewed as a positive? Wouldn't one think that a strong currency and a strong stock market should be be viewed as real wealth creation? However, our political leaders and our banking leaders tell the public differently. It is important to note that President Obama never once mentioned the condition of the U.S. Dollar last week in his State of the Union speech. We can only wonder why?
The stock market will continue to inflate until it realizes that it cannot inflate anymore. People should remember that very similar trading action took place throughout 2003 into 2007. Unfortunately, we all saw what happened when that rally came to an end. Right now the United States has over $14 trillion in debt and the market does not seem to care yet. We shall see how far this inflation rally can last.
