The market after Q1

The SPX closed at
1300.25, -0.2% on the day
and that is also what it is since last
Friday’s 1302.95 close. The Dow finished at -0.6%, led by GM, -4.9%, so it’s
probably about time to play the shell game and drop GM from the index because of
financial ratings and replace it with something that might increase the index.
Problem is, they did it with MSFT and INTC–and it backfired. NYSE volume was
1.59 billion shares, volume ratio 49 and breadth -429. The 4 MAs of the VR and
breadth are neutral at 51 and -57. The QQQQ was +0.3%, led by
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+7.2% and SYMC +6.4%, none of which are favorite trading names.

There is a lot more going on away from the SPX.
The TLT made further new lows and was -0.7% to 86.90, while the US dollar
declined, with the FXE +1.05% (Euro/$US). Against this backdrop, gold continued
to new highs with the GLD (gold shares ETF) closing at 58.60, +0.9%. The XAU led
the primary sectors/groups at +3.1% and is +7.3% so far this week. The OIH was
+1.0% and is +9.6%, having advanced seven straight days. The SMH–another
primary focus after it hit another key price zone (35.65)–was +0.2% to 36.74.
The Generals took the SPX up from 1268.42 to 1310.45 in six days from 3/8 – 3/16
and have been able to hold it for 10 days in a range between 1310.88 – 1291.94. 
The high close at these new levels is 1307.25. This range will not hold after
the quarter ends, especially with the next six trading day time zone from 4/5 –
4/12. There will be some air pockets in many of these stocks getting marked up,
like the brokers and transportation. Consumer discretionary stocks will be weak
and homebuilders like CTX and PHM will resolve topping patterns. Volatility will
increase and daytraders will prosper as the Generals/hedge funds struggle to
make any money on the long side. The switch to the euro by Iran and on a partial
basis by the Saudis will pick up steam and put pressure on the US dollar
denominated assets, while at the same time the Fed has taken away transparency
of their action by eliminating the M3 data. The best you can hope for is high
growth/high inflation, which usually translates to a trading range market.
However, if is a low growth/high inflation market, the bear cycle will be a bit
steeper but not like 2000 – 2002. One thing you can be sure of is that it will
not be a high growth/low inflation period like we had from 1982 – 2000, which is
two 8.6-year economic cycles. There has never been three 8.6 years of high
growth/low inflation since the market started. Based on the fraudulent numbers
that the government puts out, they are trying to put the spin that way, but it’s
not going to happen.

Have a good trading day,

Kevin Haggerty