Wednesday, November 25, 2009

Lower Jobless Claims, Weak Dollar Boost Stocks

The market is getting a little bounce in early trading, ahead of the Thanksgiving holiday. Trading volume will likely be ultra light today as people get ready for tomorrow and travel to see family. I'll be staying here in sunny LA, and might even try to get some early morning surfing in before the tryptophan fest.

In economic news, following yesterday's strong existing home sales report, new home sales for October surged +6.2% vs. the consensus for +0.4%. New home prices were only down -0.5% yr/yr, or basically flat for the first time in ages. Also, the supply of new homes fell to 6.7 months vs. previous inventory levels of 7.4 months. CNBC reported that this is the lowest level of supply for new homes since 1971. Wouldn't it be funny to go from our current housing mess to having a dearth of houses (which would stabilize prices very quickly)?

Initial jobless claims also came in below expectations at 466,000 vs. 500,000 consensus. This marks the first time jobless claims have fallen below 500,000 in over a year. Getting better slowly. Personal income and personal spending data both came in above expectations as well.

The lower dollar is boosting stocks and commodities in tandem again. Oil is only up slightly to $76.10, but gold is hitting new highs near $1185.

Asian markets were higher overnight; the 10-year yield is higher to 3.34%; and the VIX is back at its lowest levels of the year at 20.19, a very low level.

Trading comment: The put/call ratios were a bit high yesterday, which combined with the low VIX could lead to a quick selloff in the near future. But again, the market is no longer overbought, and I will continue to look to use upcoming dips to put cash to work. I have not added to the healthcare and telecom sectors in a long time, but they are looking more attractive currently.


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