Despite a weaker than expected first quarter GDP reading the markets rose on the day. Bond yields pulled in after reaching yields above 2.6% on the 10 year US Treasury note. Today was day two of an attempted rally and the S&P cleared a key level increasing the odds this rally may get confirmed. The next challenge for the market will be the 50 day moving average for the major averages. Given the lack of volume the 50 day may prove to be a tough nut to crack. We need further evidence to conclude a rally is about to unfold.
Today’s action was almost a carbon copy of Tuesday’s intraday action. Sellers weren’t anywhere to be found and buyers simply didn’t have too much company. Volume fell on the NASDAQ and NYSE suggesting once again institutions were on the sidelines. During the QE and ZIRP environment volume has not mattered for the most part. Normal functioning markets volume would matter so we’ll keep our options open.
Once again GDP is weak and it appears it is being accepted as okay. Many will claim we need more stimulus due to fiscal constraint from Washington. Washington hasn’t cut spending only slowed the rate at which they spending money and our budget is well over $3 trillion. How can we not get more than 1.8% growth? There are many bright ideas, but I’d like to try something that has actually succeeded in the past. Unless of course you believe we have the right policies in place where we continue to hit record number of people receiving food stamps and disability. One thing we know is certain and that is economic analysis has no business in our decision making process.
Stay focused and have a plan of attack for this market. Know where you are going to exit well before you enter the trade. Ride your big winners and cut your losers.
Stay classy.
