FRIDAY:
It may be the last session before a three day weekend but there is still economic data capable of delivering some market movement. Consumer spending and income is always closely watched and Michigan sentiment final is going to be scrutinized given the pullback in consumer confidence with the higher gas prices. Gasoline price have softened just a bit the past two weeks, and that may help buck up confidence. The numbers will be an interesting juxtaposition of what consumers say versus what they do. They are not covering contemporaneous time periods but pretty close.
Many are predicting the demise of the consumer based on being tapped out from to much debt and using up all of the 'ATM' money from home equity. This is basically nonsense. Here is a real world prediction based on historical facts and not just some gut feeling abut what the 'consumer' is feeling (they talk about the consumer as if he or she is your neighbor as opposed to the aggregate of us all): if the Fed raises rates to where the yield curve is flat and continues to curtail money supply then you will see the consumer back off. If confidence levels drop into the sixties that will adversely impact the economy and thus the market. That is the only real prediction you can make. Right now the sentiment figures are lower and trending lower, but they are not at levels that historically indicate consumer buying curtailment. A lot is riding on what the Fed does, but that is nothing new.
Volume has been lacking except in the big moves that have propelled stocks higher. That is 'just enough' volume that is keeping the move alive, but it is not the kind of volume that you have a warm fuzzy about. It is doing just enough to keep the rally going into summer; low volume is here even before the official summer doldrums marked buy Memorial Day. At key resistance that leaves the index vulnerable to a sharp pullback; couple it with some bad news and you have a problem.
Right now there is no problem, at least none the market is worrying with. There is oil back over $50/bbl, the Fed still hiking rates, trade deficits, tariff nonsense, lower money supply - - basically the same issues that were around when this rally started. Indeed it started in the midst of the worst of those issues. At some point they will get pushed back to the forefront as once more a worry. Thursday the lower oil inventories were not enough to do it, but if oil continues to climb back up above 50, things start to deteriorate.
Friday will be another light volume session so we probably won't get much out of it other than the price move. Things probably won't get much better next week with the start of summer. Thus far the bullish bias holds but as the indices move toward next resistance such as 2100 for NASDAQ and 1225 for SP500. With leadership still moving higher we continue to participate, but the higher we go on light volume the more likelihood of a more significant correction when the buyers run out of gas. |
