Look For More Tomorrow

The stock market put in another solid day today even though there was a late day selloff.  This should come as no surprise as we have a lot of economic data due out tomorrow morning.  There was a little profit taking ahead of those reports.  I think even if those numbers come in poorly, we could see a higher close.  The stock market proved yesterday it’s starting to shake off bad news by reversing early losses on the bad ADP jobs report.  Remember, most of these reports on the economy are backwards looking.  We know the 1st quarter was a bad quarter for the economy.  The unemployment rate probably went up, more people lost their job, and more people filed for unemployment for the first time.  All this we know.  The stock market is a forward looking animal.  Is the economy improving or not? That’s the question.  The stock market seems to believe there are signs of hope.  Some leading economic indicators are starting to stabilize, China came out with a very bullish new home sales report today,  and commodity prices are rising.  These are all good signs.  I believe investors are focusing on the future, not the past.  After the bell, Research in Motion (RIMM) reported great earnings and the stock is up over 30%! That should definitely help the overall equity markets tomorrow even with some rough jobs numbers.  

If you’re bearish, you are seeing that the market didn’t finish on its highs and is still in the range where it could sell off because we’re at the old lows January and February (resistance now).  That’s a possibility as always but it’s very difficult staying out of this market right now.  I added more to my long positions today by focusing on the emerging markets.  That is the place where we are seeing the biggest moves. China, Taiwan, & South Korea are especially strong. 

Just like “sell the rallies” worked for so long, “buy the dip” is now working.  Two day sell offs are all we’re getting.  At some point, the bears get converted to bulls adding more fuel to the rally.  Once we went over 8000 this morning on the Dow Jones, another round of buying (and short covering) came in and pushed us up even higher.  We did have a little profit taking at the close.  But, I’m still more bullish than bearish.  I think we’ll have pullbacks but 9000 looks to be the next logical milestone for the Dow Jones.

Gold

Gold is beginning to break down after a huge run the past several months.  You’re seeing a big shift out of gold and into industrial metals. In addition, that “safe haven” (which it isn’t) of gold is being exchanged for equities.  The risk appetite is coming back to this market. Next stop for gold seems to be 850.  I’m still bullish on gold for the long-term but being short gold vs. almost anything right now has worked very well.

This post published at www.karleggerss.com

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