FACTS TO CHEW ON

Consider this. On 10/13/05 the market low, S&P500 @ 1170, oil was at $63 and the 10yr note was at about 4.5%. At the market high on 1/11/06 S&P500 @1295, oil was at $64 and the 10yr note was at about 4.5%. In between we have had weak economic stats and strong, good earnings and bad. If oil, bond yields, don't matter and we've had 4th qtr GDP at 3.8% and 1st qtr GDP at 1.1%, high profile earnings misses by INTC,GOOG, YAHOO, upside surprises by XOM, BA, CAT, what's driving the market? It seems to me nothing moves the market like perceptions over Fed policy. It was perceptions of further tightening that drove the market down in September, and after Fed minutes were released on the first trading day of the year, it was perceptions that they were almost done that pushed the market up to 1294. So the lesson seems to be ignore the noise and watch how the market feels about the Fed.

JOBS

Wednesday's blog was somewhat prophetic. I said the market moves is bursts and I thought the next one would be down. I didn't think it would come so quickly. The move was surprising considering, auto sales and retail sales were very good. There was a lot of fleet sales in the auto numbers and a lot of gift card redemptions in the retail sales. I would suppose that is why they weren't taken seriously. The payroll number today was negative for the market, but the bond market rallied significantly. It's getting harder to read the tea leaves. Next week is a light data week and earnings are tapering off. We have Treasury auctions, which will be interesting in light of the fact that if prices hold here, buyers will have a negative carry. The Iran situation will also be front and center, so oil we be important. The last few days have seen a good sell off in both oil and gold. Both were overbought and up at resistance. I hope we have significant corrections so we can buy them again.

GOOGLE?

In spite of the fact that Google is down 35 pts and 7 out of 10 of the largest NASDAQ stocks are negative, the index trades around flat as I write, not bad at all. However the negatives continue to pile up. Oil is approaching $69, the bond market is down again with lots of supply coming next week, with Intel, 2 out of the big 3 have reported punk earnings, housing stocks are weak as both the MBA survey fell 5% and the NRA index of pending sales fell 3%. Lately I've also noticed a correlation, which makes sense, between housing stocks, retailers and the bank index. They are all weak today. Mortgage lending and home equity loans have been a big source of bank profits, and of course we all know how dependent retailers are on home prices.
The character of this market this year and maybe longer has been long periods of little volatility and then big bursts up and down, ala the first day of the year and the big swoon on Jan 20th. I think we are headed for another swoon, it is just a question of what sends it over the edge. If you would have told me about Google beforehand, I would have said that would have been enough. Maybe oil touching 70 or a bad auction next week . Stay tuned.