Delayed Reaction?

by Larry Levin


What a rally! I guess it took traders a while to realize that whether the Fed is done cutting rates or not - everything is bullish right now. All of the markets exploded today, especially the NASDAQ and financials.

I suppose all of the investors "on the sidelines" are getting nervous that the market is taking flight without them. They cannot bear to not be in the market when so many "experts" say the bottom is in and you should buy-buy-buy. (Do they ever say anything else?) One thing is for sure, these investors are not reading the economic data.

The Commerce Department estimated this morning that higher prices took away all the income gains U.S. households received in March. With spending rising faster than incomes, the personal savings rate fell from 0.4% of disposable income to 0.2%. Luckily this isn't bad news. Who needs to save money anyway?

"The forces that had supported consumption have collapsed," wrote Joe Liro, an economist for Stone & McCarthy Research.

Another report this morning showed surging unemployment claims. Erasing the drop reported last week, first-time filings for state unemployment benefits jumped 35,000 to 380,000 last week; the Labor Department said this morning. Economists say claims running consistently higher than 350,000 signal significant weakening in the labor market, which has been a fact for months now. Luckily this isn't bad news. I mean come on - who needs a job anyway?

Another report showed that construction spending plummeted by 1.1% last month, which is the worst drop in 26-years. Luckily this isn't bad news either.

And in another report today, we find that manufacturing activity contracted again in April with a 48.6% reading. Readings under 50% indicate the economy is contracting and not expanding. The index has been under 50% for three straight months now. Hey, who needs a growing economy?

Because the number was slightly better than expected, it was "spun" as good news. The details, however, are just awful. The new-orders index was steady at 46.5% in April, but has been below 50% for five months. The employment index fell to a five-year low of 45.4% in April from 49.2% in March. The inventory index rose to 48.1% from 44.9%, indicating slower contraction in stockpiles. The prices index rose to 84.5% in April from 83.5% in March, with 71% of firms reporting paying higher prices, the largest percentage in four years.

In order to find ANY good news in this data, you would have had to graduate from the "University of Spin"...located in Washington DC , of course. Or is that located on Wall & Broad streets?

Luckily U.S. car makers came out with great sales data to mitigate the economic data above. Ford sales dropped 12.2%, GM sales fell 16.2%, and Chrysler sales plummeted 23%. Did I say they were great? Well, they are...after all as they say in New York "Well, the results 'could have' been worse."

Normally I'd say that tomorrow should be interesting, but today I doubt it. Unless the unemployment is staggeringly poor (like a 6% unemp rate) the market should move higher. After all, the near-term trend has been up for a few weeks now.

Will the next move reach 1455.00 S&P?

Real Time Trading Signals*for

Trade Date: 5/1/08

E-Mini S&P Trades*
(before fees and commissions):

1) VA sell @ 8:50am at 1389.50 = +1.00, +2.00, -1.75

2) VA sell @ 9:20am at 1389.50 = -1.75 & -1.75

3) 80% buy @ 9:30am at 1389.25 = b/e & +4.75

4) Engf buy @ 11:30am at 1398.00 = +2.75 (1 lot)

5) OTF buy @ 1:00pm at 1403.75 = +1.00 & +1.25

6) VA buy @ 1:25pm at 1405.50 = b/e (1 lot)

7) Algorithm trades (5)...combined total...+5.25

E-Mini Russell Trades*
(before fees and commissions):

1) Buy @ 9:13am at 719.6 = b/e (1 lot)

2) Buy @ 10:54am at 722.0 = -.5 (1 lot)

3) Buy @ 1:54pm at 728.4 = -1.2 & -1.2 ...-$290


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