Retail Sales Strong...But Apple Inc. (NasdaqGS: AAPL), Goldman Sachs Grp (NYSE: GS) Warn Of Weakness
Industrial production numbers from China came out very strong with a year over year gain on the monthly number of 19.2%. In addition, U.S. Retail Sales numbers were very strong. This gave the market a solid gap higher into the open even though the dollar was stronger as well. Since the open, the dollar has continued to squeeze higher. This move on the dollar coming after a multi day technical bullish consolidation pattern. As the markets inched up throughout the first hour of trading, the dollar continued to gain traction and squeeze. However, there were some flaws in this. The stocks showing signs of life were the likes of Exxon Mobil (NYSE: XOM) which is rather counter intuitive based on the strength in the U.S. dollar and the slight weakness in oil.
While Exxon Mobil (NYSE: XOM) remained extremely strong, other leaders in the market were losing ground and collapsing down. Stocks like Apple Inc. (NasdaqGS: AAPL) and Amazon.com, Inc. (NasdaqGS: AMZN) were alerting traders that the markets gains were likely to be given up shortly in the tech sector. In addition, Goldman Sachs Grp (NYSE: GS) and JP Morgan Chase Co (NYSE: JPM) were also telling traders the financials had no strength today. These signals when the market was hammering on the highs of the day around 11:00am ET, were signaling trouble in "River City". Sure enough the market has rolled over and come all the way back in, hovering around the flat line.
Other announcements making the news today are coming from the governments pay czar who is limiting cash compensation at automakers and banks executives to $500,000. In addition, Goldman Sachs Grp (NYSE: GS) came out yesterday in an attempt to appease the public and said they would pay their top 30 executives purely in stock. Granted, that is essentially what Lehman Brothers and Bear Sterns did with their employees owning up to 30% of the company...and we know how that turned out. Long story short, no matter the regulations, the government has shown they have no clue how to do anything and just screw things up even more. In addition, greed and fear rule the markets, this has been the way it is from the very beginning of time and will likely continue to rule free markets forever. The key is to let free markets work. If you let companies fail that screw up then companies will try and avoid screwing up. If you bail them out, what really is the incentive to not screw up and take risks that make cause the collapse? Those in Congress do not get it and unfortunately are making the future bubbles even bigger. For now focus on the short term with your ear to the ground on the long term next bubble.
Today being Friday, it is expected that light volume will prevail. Volume has been hard to come by of late in turn the markets have floated sideways to higher. Light volume usually dictates sideways to higher markets due to the psychology effect of human nature. My nature we are positive in our outlook. This tells us that when few participants are in the market, the markets will float generally higher. To prove the point, think about this. If you are not positive, there are countless antidepressant drugs to be put on so you become positive.
Chief Market Strategist