Picture Perfect Monday...

Stocks opened slight higher and managed to trend up throughout the 1st two hours of the day. The advance paused after 11.30 am EST and the market fell into a narrow sideways range. The final hour of the day saw prices again turning up and a late day buying spree led the Dow to a new multi month high close of

The early positive mood in the market was set by the release of the monthly Pending Home Sales Index. The index was widely perceived to be unchanged but surprised and came in with a plus of 3.12 %. The market responded positive to the number and immediately traded up.

President Obama announced some modifications to the tax code designed to close some tax loop holes for corporations. Undoubtedly the news itself was not positive for corporate America but the stock market liked it never the less. (at least it did not sell off after the announcement).

I am the first one to admit...I am somewhat surprised about today's advances. All of the major indices have now made new highs since the beginning of the rally from early March. The S&P is now positive for the year and it certainly looks like we are heading for another positive week.

I happen to believe that today's advance is as much of a reaction to the rally in Emerging Markets overnight (emerging markets rallied in a big way overnight, on average more than 5 %) as it is a testament to the strength of the stock market.

If you are invested...that's great...but I certainly would not put new money to work at these levels. I do not discount the possibility for additional gains during the week but I am getting the feeling that we are nearing the "to much to fast" point in the market.

The stock market is now clearly momentum driven. Momentum seems to be building in advance of the release of the stress test on May 7th. I believe there is a real chance that the release of the stress test results might prompt the air to leave the balloon (so to speak).

I still expect some form of market correction at one point but at least till the 7th I expect prices to stay firm and we can perhaps even see another 3 % to the upside.
We will see how the week develops but for the time being the market should stay higher.

Until tomorrow

Steve Benger