Another great day!
Well, not so much for me as my neutral stance is now annoying but lots of people seemed to be happy and I had dinner on Wall Street and those guys seemed pleased with themselves (apparently I'm the only one who was ever worried as we dropped 500 points last week).
What scared me about my conversation with some fund managers was the reason they weren't worried – "Bernanke is speaking tomorrow (Atlanta Fed Conference – 8:30) and Yellen is speaking at lunch (Brandeis – 12:30)." This strikes me very much as a "fix is in" sort of mentality which certainly can't be healthy in the long run. Is it the job of the Fed to "spin" the economic data to prop up the markets? Actually, it just might be!
Under the Federal Reserve Act of 1913 and amendments over the years, the Federal Reserve System:
- Conducts America’s monetary policy.
- Supervises and regulates banks and protects consumers’ credit rights.
- Maintains the stability of America’s financial system
- Provides financial services to the U.S. Government, the public, financial institutions, and foreign financial institutions.
The Federal Reserve makes loans to commercial banks and is authorized to issue the Federal Reserve notes that make up America’s entire supply of paper money so one could say that IT IS the Fed's job to prop up our phoney-baloney monetary system AT ALL COSTS! So whatever the CPI is tomorrow, Uncle Ben will be there to tell us every little thing's gonna be all right.
"It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." — Henry Ford
I've been looking for some good news to latch on to – something that would make me feel good about getting back on the buy side and tonight I see that Chinese Factory Output rose 18.1% in May, even faster than April's 17.4% gain. That's not a bad thing, that's our factory over there making stuff we use, often enough making them for American companies. In the grand global economy a productive China is almost as good for us as a productive Detroit used to be. This production growth should also lead to rate hikes which may lead to another dip in the Chinese markets but, as I said the other day, I'm not looking at them any more…
Of course rates going up in yet another part of the world can't be any help for our Treasury Market but neither does the Wall Street Journal's list of 80 (so far) subprime mortgage lenders that "have closed shop since the end of last year as clients defaulted on payments and banks cut off the funding required to make the loans."
So how about those markets?!? Woo hoo – another great day – Yipee!
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The Dow bounced off 13,600 to finish at 13,553. Unfortunately just last Tuesday I said "While we held 13,550 for today, our failure to get back over 13,600 does not fill me with confidence!"
- Transports stopped right at the 50 dma, very surprising with the rise in crude.
- The S&P poked over 1,525 but finished at 1,522 – as with the Dow, it would have been nicer to form a proper consolidation.
- NYSE closed at 9,926 and needs to get back over 10K.
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The Nasdaq was the star of the show today, breaking 2,600 and finishing just a point under.
- The SOX actually look to be in the best shape for a nice jump – hopefully they can break 495 and keep going.
- Russell will lead the way tomorrow, bouncing off 840 was bad but we'll give them another chance tomorrow.
Oil went flying all the way through $68 and looks ready for $70 but if the markets don't care – why should we? Gold held flat so they don't care and the dollar broke over 83, which means oil, relative to the dollar, is now up a solid 10% for the month. Thank goodness it's not part of the CPI!
I couldn't bring myself to pull the trigger today as this whole thing doesn't feel right to me but the Dow is breaking out , as is the S&P and the Nasdaq so we'll have to respect the charts but it's the SOX I'll be watching closely. As Happy Trading's chart points out, they have every reason to rally:
