MARKET WRAP – NEXT STOP: 1,220?

As we mentioned yesterday, the market action was getting that “can’t lose” feel again.  Investors were eager to buy stocks today as fear has quickly turned to greed.  There was no real news on the day, just undisturbed higher bids.   Volume was moderate and breadth was very strong at 5:1. Today was an important follow-thru day by any technical metric.  Many will view this action very positively.

This 3 day rally has had all the characteristics of the mini bull market leading up to the crash in recent weeks: the Monday melt-up, the pre-market dips being bought, every minor dip was bought, high beta outperformed, stocks rallied into the close and any and all news was good news.   Government has saved the day once again.  Despite their threats, however, governments have not been able to save the Euro which continued to get crushed on the day.

The market traded as high as 1220  prior to the collapse so shorts/bears should be aware of the fact that the bulls will try to drive this market back to its pre-crash highs seeing as most market participants believe the Euro crisis is a thing of the past.

From Daily Futures:

U.S. Economy
The U.S. Census Bureau said that exports were up $4.6 billion to $147.9 billion in March while imports were up $5.6 billion to $188.3 billion. The result was net imports of $40.4 billion, roughly as expected and the highest in 15 months. The June U.S. dollar index closed up .354 at 84.967, near its contract high.

The U.S. Treasury Department said the federal government posted a budget deficit of $82.69 billion in April, the largest ever for the month. Also, Treasury sold $24 billion 10-year T-notes at a median yield of 3.51% with a bid-to-cover ratio of 2.96. The June U.S. T-bonds were down 15/32nds at 120.10/32nds.

The Mortgage Bankers Association said that its index of mortgage applications was up 3.9% last week. The average rate on a 30-year fixed mortgage fell from 5.02% to 4.96%.

Grains and Cotton
Corn started higher, but ended up just 1.25 cents at $3.782 after talk that China bought 300,000 tons of corn from Bunge.

Rain continues to fall over much of the midwestern U.S. where planting progress has been ahead of schedule. July soybeans were down a half-cent at $9.655.

Lumber
July lumber dropped $5.60 to $263.90, the lowest close in four months.

Sugar
July sugar closed up .76 at 14.67, helped by bargain-hunting.

Energies
The U.S. Department of Energy (DOE) said that crude oil supplies were up 1.9 million barrels last week to 362.5 million barrels. Supplies of gasoline were down 2.8 million barrels while heating oil supplies were up 900,000 barrels. July crude oil ended down .075 at $80.15.

The DOE also said that refinery use slipped from 89.6% to 88.4% of capacity last week. Over the past four weeks, gasoline demand was up 2.7% from a year ago and distillate demand was up 7.5% from a year ago.

Metals
Investors continue to flock to gold after the big bailout in Europe. August gold closed up $22.80 at a new contract high of $1,244.90. July silver closed up 36.9 cents at $19.663, the highest close in 22 months.

Currencies
Eurostat said that real GDP in the EU-27 was up .2% in the first quarter of 2010 and up .3% from a year ago, better than expected. Also, industrial production in the EU-27 was up 1.2% in March and up 6.0% from a year ago. The June euro closed down .0062 at 1.2634.

The U.K.’s Office for National Statistics said that the unemployment rate for January to March was 8.0%, the same as a month ago. The U.K. has 2.51 million people out of work, the most since 1994. The June British pound fell 1.32 cents to $1.4819.

Statistics Canada said that exports were down .7% in March while imports were up 2.0%. The result was net exports of C$254 million, down from C$1.2 billion in February. The June Canadian dollar ended down .09 at 98.06.

Industrial production in India was up 13.5% in March from a year ago.