The DJIA has done some good work, but now faces new challenges, evident HERE. 

Breadth is not bad.  Since last week over 50% of NYSE stocks are trading above their 200-day MAs.  HERE.  Not that this is predictive:  in early 2002 almost 80% achieved this measure.  It ended in tears.

The NYSE volume tendencies are a concern, however the NASDAQ trend is better.  A mixed picture.

There's no need to cite the various country & sector indexes that are putting in new highs.  "DICEX" is up about 12% YTD.

It's interesting, however, to compare the BRICs.  There's a chart HERE.  The commodity exporters are extremely strong.  China and India are on trend, but have yet to retake their little 2007 mini-bubble (or whatever it was); there are challenges, not least of which is food and energy price inflation. 

One big problem is that the DJ Banking Index is showing no sign of breaking its downtrend channel. Very ugly.  HERE. 

The bond market action - with 10-year T-bills still well below 4% - is difficult for me to understand.  The illusory (?) CPI number may have given investors reason to hold on to these bonds. Were equity investors fooled by the same reading?  Or, are the low rates telling us something about what's around the corner?  I don't get it.

The USD index is not following through and fell back down under 73.  That's no good, but it's probably just range bound.  The surprising German GDP number didn't help.

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IMHO complacency - presently quantified by the Vix - is a danger.  I've got significant positions in "DICEX" and am pleased with the results, but have taken some profits, am holding my TIPS collection, added to a successful SC long-short fund (TFSMX), maintain a small PM position, and am leaning heavily on conservative allocation funds with good bear market records.

Patience is the companion of wisdom. - Saint Augustine

Volatility in the treasurey market may be trying to give us some guidance about the future. Fridays candle for the 10 year treasurey was a DOJI.  It closed about where it opened but it had a 15 basis point swing in between.  While the DOJI pattern usually signals a lot of short term indecision, the ATR has barely backed down from a high point that has not been seen since mid '03.  High volatility normally signals a change in direction. In this case we are getting unusually high volatility on both a short term and longer term basis.  Based on the volatility readings of the 10 year treasurey, it would seem that long term interest rates will go higher, but within a trading range.  Higher rates would usually be bearish for stocks, bullish for the USD, & bearish for commodities.  Keep in mind that the corralations between these asset class's is always nebulous  and is a constantly moving target, especially for the short term.  The corralations work a lot better over the long term.  The short term volatility could be used to time trades out of instruments that do poorly in a rising rate environment and trade into instruments that do well when rates go up.  This is not something that anyone has to rush into, but more of a direction to go when opportunities present themselves. 

uh 

Norbert, Thanks for your assessment. As for BRIC, I am inclined to embrace the BR and chuck the IC (both India and China depend heavily on imported oil and India is once again losing its battle against inflation). Is the DJIA Banking Index a sign that investors believe financials haven't bottomed out? I prefer to err on the side of caution and am purposely avoiding exposure to financials through 2008, which is why I like Amana Growth (AMAGX) and Fidelity Convertible Securities (FCVSX) since both have virtually no exposure to financials. President Bush got nowhere with the Saudis, so Goldman Sachs' forecast for $141pb crude may come to pass. Allocation funds like LAALX and PRPFX continue to bob above the stormy seas. Looking ahead, I think the Fed is probably done lowering; "inflation expectations" are clearly not "contained," as they say, in respect to gasoline and food: 1 gallon of unleaded gas and 1 gallon of milk now cost $4.

I just found it at Fido site and some people may find it interesting. Hope the link works. FWIW. KM

http://personal.fidelity.com/products/funds/content/pdf/april_sun_shines.pdf

The FT ran a piece on prediction markets HERE.  So, I thought I'd look at what bettors are saying on the economy and market.

• Chance of a US Recession in 2008?  Just 36% now, down from 75% earlier this year.

• DJIA 2008 close?
• Above 10,000: 90%
• Above 11,000: 82%
• Above 12,000: 65%
• Above 13,000: 52%
• Above 14,000: 27%
• Above 15,000: 8%

• Israel - Palestine Peace Treaty by Jan 20, 2008: 25%
  

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Sell in May and go away?  Look at this (it gets even better if you include the "3rd Year of presidential cycle" rule):

 

 

 

I like that chart.  Someone on HO wants to see it also.  I'll send them over. 

Based on S&P and Nasdaq futures, we will have a flat open for the stock market today, however with oil and precious metals rising, the $$$ falling, and the bond market confusing, I expect things will deteriorate as the day wears on.  Whether it is the summer doldrums or another Hindenburg event remains to be seen, but I may take it easy today.

uh

UH -- FYI my computer sold my SLW today when it went to short-term overbought. Good trade . Good money. Thanks for mentioning it here.

I am keeping SLW on my watch list.

I just don't get this Sell in May and go away thing...

For lower returns, higher transaction fees, more time and effort to choose the right day to sell and the right day to buy, you get less volatility.  It seems to me you have the same volatility during part of the year and less during the summer.  the market during the summer tends to be dull and not very volatile anyway... so what is the point.  Am I missing something here?

Stats

 

statsguy:

I just don't get this Sell in May and go away thing...

For lower returns, higher transaction fees, more time and effort to choose the right day to sell and the right day to buy, you get less volatility.  It seems to me you have the same volatility during part of the year and less during the summer.  the market during the summer tends to be dull and not very volatile anyway... so what is the point.  Am I missing something here?

Stats

 

Your in a canoe heading for a waterfall and I am jumping in and out of the canoe you are not,  I have a chance not to go over the edge.