MARKET WRAP – STOCKS HIT NEW 52 WEEK HIGH

Equities powered higher today by 0.7% after the SEC imposed a new rule banning all selling at the New York Stock Exchange.  Of course, we’re just kidding, but if I didn’t know any better I’d have assumed that the SEC banned down ticks at the NYSE.  The rally over the last 6 weeks has been really breathtaking.  If you’ve bought stocks in the last 4 weeks you’ve experienced just 4 down days.  If you’ve bought stocks in the last 32 days you’ve experienced just 7 total down days.

Many reputable news sources are attributing today’s move to the existing homes sales, which were actually in-line with expectations and show underlying signs of continuing weakness.  The truth is, this market is rallying on very bullish sentiment, fearful short covering and technicals.  In other words, no real news.

In addition, investors are very eagerly running into stocks as earnings season begins in a few weeks and shorts slowly begin to throw in the towel as this market simply appears unbeatable.  We’re almost certainly setting up for another “sell the news” earnings season at this pace.  And if earnings even remotely disappoint we could see a substantial “sell the news” earnings season.

The amazing stats just continue to pile-up:

  • The Russell 2,000 has rallied 18% in just 6 weeks.
  • The S&P has rallied 12.5% in 6 weeks.
  • The SPY and Russell 2,000 have rallied in 25 of the 32 sessions during the move higher.
  • Banks have rallied 18% while rising in 26 of the 32 sessions.

Perhaps most amazing is that most of this move has been on very little news and light volume.  Nonetheless, the market’s collision course with S&P 1,200 appears unstoppable.

From Daily Futures:

U.S. Economy
The National Association of Realtors said that existing home sales were at an annual rate of 5.02 million units in February, down .6% on the month, but a little better than expected.

The Richmond Federal Reserve’s regional index of manufacturing increased from +2 to +6 in March, better than expected. The June 2011 eurodollars were up .035 at 98.46.

The U.S. Treasury sold $44 billion of two-year T-notes at a median yield of .96% with a bid-to-cover ratio of 3.00.

Grains and Cotton
Today’s U.S. Palmer Drought Map shows excessively moist conditions in the Dakotas, Nebraska, Iowa, Missouri, and Illinois. The central U.S. is enjoying another day of dry weather today. May corn closed down 7 cents at $3.637.

The USDA said late yesterday that the good to excellent ratings for the winter wheat crops in Kansas, Oklahoma, and Texas were 64%, 67%, and 53% respectively. July wheat fell 9.75 cents to $4.892, the lowest close this year.

Livestock
After yesterday’s close, the USDA said that, as of February 28th, there were 516.8 million pounds of frozen pork in storage, down 17% from a year ago and more than expected. June hogs closed down .80 at 82.05.

Have cattle prices reached their limit? June cattle fell 1.70 cents to 92.37 after gaining nearly 13 cents in three months.

Sugar
The liquidation continues in sugar. May sugar dropped 1.27 cents to 16.57, the lowest close in ten months.

Orange juice
After yesterday’s close, the USDA said that, as of February 28th, frozen supplies of orange juice concentrate in storage totaled 1.295 billion pounds, up 3% from a year ago. May orange juice closed down 2.05 cents at $1.4250.

Metals
Late yesterday, the International Copper Study Group said that world production of copper exceeded usage by 365,000 tons, up from a 224,000 ton surplus in 2008. In December alone, production exceeded usage by 115,000 tons. May copper ended down .0015 at $3.3790.

China’s Customs Office said that imports of refined copper were up 12% in February.

Currencies
The U.K.’s Office for National Statistics said that consumer prices were up 3.0% in February from a year ago, down from a 3.5% annual gain in January. The June British pound was down .0059 at $1.5024.

Statistics Canada said that its composite index of leading indicators was up .8% in February after a .7% increase in January.

There doesn’t seem to be much hope that Germany will budge at this week’s European Union summit and agree to to any aid for Greece. There is ongoing talk that help for Greece may come from the International Monetary Fund. The June euro finished down .0055 at $1.3489, the lowest close in ten months.

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Cullen Roche

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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