Consumer Confidence Still Near Record Lows

The market is getting a boost in early trading, following a stiff 2-day drubbing for stocks. Considering the market rallied nearly +25% from its intraday March lows, it is not surprising to experience a -5% pullback.

Consumer confidence came in at 26.0 for March, which I think is a record low for that reading. If stocks continue to work higher, they will be climbing the proverbial wall of worry that most bull markets initially endure.

The financials are leading the action so far. Market participants are hopeful that there will be some positive developments on the mark-to-market accounting front, which has been hinted at by Congressmen Frank. This would be a nice break for banks and the continued writedowns they have been forced to take. I have always argued that in tremendously illiquid markets, forced sales should be used for M2M purposes.

The Case-Shiller Home Price Index for January was 146.4, and the 20-city composite showed a -19% yr/yr decline. That's pretty steep, but it will be interesting to see if there has been any stabilization by March (this reading was for January). Anecdotally, I have heard about more housing activity, especially due to the very low mortgage rates. And this morning, Lennar (LEN) topped revenue expectations.

Across the pond, European bourses are stronger this morning, while Asian markets finished mixed overnight. The Asian Development Bank said that excluding Japan, Asia's economy will grow +3.4% this year, less than the +5.8% previously estimated. Japan's Prime Minister offered an outline for a new stimulus package for its declining economy.

The dollar is mixed today; oil is slightly lower near $48, after a big drop yesterday; gold is hovering near $915; the 10-year yield is lower to 2.69%; and the VIX is -4% lower to 43.5, and still above its 200-day average.

Trading comment: Yesterday I added some UWM (leverage small-cap etf) to my aggressive accounts, but that was it. I am still mulling adding to my SPX exposure, as I think this market has another push higher at some point.

My concern is what happens when we get into Q1 earnings season. I expect earnings to be subdued, and any guidance to be extremely cautious. Given that earnings season will commence about 6 weeks from the March bottom, this recent rally could have used up its time by then. But let's not put the cart before the horse, there is still a lot of trading sessions between now and then.

long UWM