Monday, November 23, 2009

Thanksgiving Comes Early For Investors

I mentioned last week that this market has no memory from day to day. The market ended last week on a subdued note, and it was hard to see what the catalyst might be to spur a rally this week. But overnight the dollar fell, Asian markets rallied, and buyers stepped in.

Our markets opened strong, and the S&P 500 is right back near its highs for the year. So much for the "long awaited" correction. This is why I wanted to put more money to work into the dips last week, even if it didn't feel great.

Over the weekend, Chicago Fed President Evans commented that he thinks interest rates will remain near zero well into 2010. That spurred traders to sell dollars, which boosted commodity prices. Oil prices are higher near $79.60 while gold has hit new highs around $1165.

Our markets also got a boost this morning from a much stronger than expected home sales report. Existing home sales surged +10.1% in October, versus estimates of just +2.3%. That is a very strong datapoint, and revisions to September's numbers were positive pointing to a monthly increase of +8.8%.

Other recent housing reports have been on the weak side, but each time I said that the housing data is likely to continue to be lumpy at best. Today's data is one of the good lumps, so make a note of it to remind yourself if and when the next datapoint is not as good.

The sentiment indicators mostly reflected increased bullishness last week, but the chart below of Citi's Panic/Euphoria Model shows that there is still plenty of bearish sentiment out there. This model takes a wide array of data into account to compile its results, and you can see that it recently moved back into the bearish side of the ledger. This could bode well for the bull case of looking for continued strength into year-end.

Trading comment: I put some more money to work during last week's pullback, so I don't feel the pressure this morning to chase anything higher. That's been the formula that has worked this year. The spike in gold looks like its getting a little extended. I heard that the Russian central bank was the latest buyer of gold. That makes 3 central bank buyers, by my count. As such, I may look to trim a little, as gold looks ripe for a correction at some point.
long GLD


At 12:22 AM, Blogger michaeld said...

We need vigorous economic growth to ensure that unemployment goes down. That is the only way real estate prices will recover and bank balance sheets will improve.



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