IN DENIAL

It seems to becoming clear that the economy is slip slidin away. Factory orders, just released were soft, up 1% when a 2.5% bounce was expected. The non-manufacturing ISM came in at 52.4 much lower than the 55.5 expected, mortgage applications were lower again. Yesterday we heard the big three had what can only be described as lousy auto sales. Overall sales are slowing as well. I'll be financing is getting harder to find. The day before, manufacturing ISM came in at 50.9, lower than expected and below last months reading. we've got $64 oil which translates into gas at 2.70 a gallon nationwide.Earlier this week we had an earnings warning from a bank that the sub=prime is spreading into alt-A mortgage sector. Through a tightening of credit standards, availability is being reduced. The S&P is only about 2% off its high. Either we are going to see some better numbers soon or one of them will be the straw that breaks the camels back and down we go again. HAPPY EASTER

STILL RUNNING ON FUMES

We are up 4% since I said that on my last post 11/16. Its even more true today. The fumes are, the statement the Fed issued at its last meeting, which were deemed to be less hawkish and paving the way to a move to a neutral stance. Secondly, the testimony of Bernanke, again more soothing words interpreted to be bullish, and finally the release of the Fed minutes, which even though superseded by Bernanke's testimony still helped provide a good tone to the markets. I guess the lesson is never underestimate the ability of the market to continue rallying on the same old news., very much like the Fed is done rallies we had earlier in the year.
The hard news has been anything but bullish. The sub prime mortgage market continues to deteriorate. Earnings are indeed slowing down. Retail sales were flat. Net foreign purchases of our securities were weak. Industrial production fell. Microsoft warned we are overestimating demand for Vista. Housing starts fell 14%. The BOJ raised rates, Bank of England said there is one more increase to come, and the ECB is signaling a rate increase for next month. Back on 11/16 71% of NYSE stocks were over their 200 day ma. Today 78.6% are over their 200 day ma.Almost everything is participating. Margin debt is at an all time record.
I didn't mention that the CPI came in a little hot yesterday, because the bond market really didn't react to it. There is the rub. All the negative news I mentioned is being tempered by the bond market backing down to a 4.7% 10 yr yield from 4.9% and the last GDP number coming in at 3.5% after we saw such weak numbers in December. The market has seen this movie before and is not going buy the economic weakness story so easily especially when a little weakness is good for softer bond yields.So we may have to wait for the GDP to be revised down to 2-2.5% and first qtr estimates to come in below that before that story gains traction. So even though we are long in the tooth, the catalyst is not yet upon us, but we may be running out of fumes.