Up,Up...up and away

The market opened stronger and managed to extend gains throughout the day. The rally briefly paused midday but then went on to form another leg up. A significant part of the gains were given up though during the last 30 minutes of the day. Never the less, at the close all of the major indices were solidly in the green with the Dow + 166 points, + 2.07 %.

As I have been saying for the past couple of days...the markets inability to press the downside even though there was enough questionable news out did suggest that another upside leg was imminent. We certainly got it today.

All of the major indices pushed into new territory and made new highs going back to February 2009. Unfortunately though the market's failure to stay above those levels might be a problem tomorrow. If we reverse below yesterdays low after making a new high today...then we might officially start to see a true correction. Right now lights are green and there is now little resistance to the upside.

On the economic front the big news of the day was undoubtedly the fact that 1st quarter GDP number came in worse than expected. Consensus was a decline of 4.7 % but the actual number was - 6.1 %. The magnitude of the decline is not good...however...as with everything there is another side to it.

Contrary to expectations the consumer expenditure number increased at an annual rate of 2.2 %, a sign that we, the consumer, has not gone into complete shock yet. The increase in consumer spending helped the market quite a bit and supported the price advance.

The Fed ended their meeting and released the policy statement at 2.15 ET. As expected...no change in interest rate policy (tough to do when you are at zero anyhow). Perhaps the one thing which was of significance coming out of this meeting was the statement as shown below:

"although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time."

Or...to use my words...things are bad, will stay bad but we are better off than we were 2 months ago. Not really sure whether this will inspire confidence over the long run...so we will see.

My target for any upside breakout was the 8200 to 8250 area in the Dow. We hit that today...so the question is what's next ?

I am still market neutral and expect prices to finally retreat at some point. However, trends are up and the trend is your friend.

I cannot shake the feeling that we are stretching a rubber band right now and some form of snap back is inevitable. We are currently witnessing the greatest advance in stock prices in more than 70 years..this simply cannot continue. (Small caps, Russel 2000, have now rallied more than 40 % from their lows 7 weeks ago)

So...I remain neutral and expect prices to turn lower at one point within the next week or two. Buy some puts on the S&P on another up day...perhaps tomorrow!

Until tomorrow,

Steve Benger