Friends
As we prepare for a new week of trading, the report of the death of Osama Bin Laden is trumping all other news, economic or otherwise. Americans feel pretty darn good this morning and as far as the markets are concerned, that sure can’t be a bad thing. So much of what moves markets is confidence and good feelings, and moments like this can spark the animal instincts that move markets. Will there be lasting effects of the Bin Laden news? Only time will tell. It is hard to determine how long the good feelings will last, but for now let’s just enjoy the moment.
As far as the markets and what transpired last week, the liquidity vs. reality theme is alive and well. The GDP and weekly unemployment claims numbers were disappointing, if not unexpected, and the effects of rising oil and soft commodity prices seem to be starting to take their toll. Contrast that to the continuing improvement in corporate earnings and the fact that Dr. Bernanke at the Fed indicated in his press conference that the Fed will continue to keep interest rates low and do whatever it takes to keep this economy from slipping back into recession territory. QE2 may be ending soon, but the Fed stands ready to supply whatever liquidity is needed to keep this slow growing economy headed in the right direction.
In the meantime buoyed by a nice corporate earnings season and the continuing Federal Reserve supplied punch bowl, stocks are still pushing higher on what seems like a daily basis. We finally got through the 1350 level on the S&P 500 and closed Friday at 1363, which seems to indicate that we have successfully penetrated the resistance level and may have established a new support level for the next few weeks. We will look at 1375 as the next resistance level to challenge and perhaps 1400 will be in the cross hairs in the not-to-distant future. Even as GDP numbers disappointed, housing remains in the doldrums, gasoline prices continue to rise, and costs of all types of other things continue to rise, stocks fueled by liquidity continue to befuddle the bears who can’t understand how share prices can rise in the face of all these negatives. For the time being, Dr. Bernanke’s Federal Reserve remains ready to do battle with forces that would weaken the economy, and as has been the case for the past two years it has not paid to fight the Fed.
Enjoy the great news today everyone. We’ll keep an eye on the market for you this week and report to you later in the week.
