The economic news flow last week had the "hear no evil, see no evil" feel to it. Whatever the news – the market said fine. Everything is now goldilocks, as we go back to the future from Kudlow 2006. Bad GDP is ok, it's transitory. Bad unemployment is ok, indeed embraced since it means QEinfinity. And so on and so forth – heck even Barron's is running positive headlines on their cover! Eventually this will change and it will be something to take note of – either (a) good news will lead to selling or (b) bad news actually matters. Futures are down some this morning on some Italian bank issues; well I should not say "some" – this 0.5% dip would be the worst loss of the year so I guess it can be labeled "futures are down huge this morning" within the context of 2013. We'll see if the daily dip buyer show up – they were absent for the first time all year middle of last week but heeding that change was not useful short run as Friday we had the gap and go day. There are now four (count em!) gaps in the S&P 500 chart dating back to mid November 2012. Not to be a broken record but from a purely analytical standpoint it will be fascinating to see what fills some (or all) of 'em.
As for the S&P 500 chart, you can see the bounce off the 10 day moving average Friday, and a push back to the top end of this channel. This has been the range (upper half of the channel) for all of 2013 post Jan 2. While overbought on some intermediate measures, in the short run last week's distribution mid week actually helped work off some of the short term extremes. Further the 10 day has been the level to watch for the year thus far. That is very strong for an index, usually you will sniff the 20 day every few weeks at least. One major positive is the slopes of all the major longer term indexes are now back in an upright position.
I would like to point out some interesting happenings in the bond market – both in junk and emerging market debt. Quite a selloff here, and something to monitor – sometimes this foreshadows negatives in equities.
As for the economic calender:
ISM Non Manufacturing Tuesday – expectations of a fall to 55 versus 55.7 last month.
Consumer credit Thursday – watch to see if the explosion in student debt continues. (not a market mover per se)
Those are really the main two, we got the bulk of the market movers out last week. Note gasoline prices have picked up these past 2 weeks, and along with the payroll tax hike back to normal versus the 2% holiday that's a secondary strain on the consumer. Thus far the market could care less. Eventually it will matter; one just never knows when eventually is.
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