Mixed Signals, Watch Commodities

At the beginning of the year we saw the high for the year on the S&P 500 to be 1150.  To date the high, made yesterday, was 1175. The big question for me,  what does one do with this information?  Is this a breakout or just exuberance over the the fact that the market has held over the 1100 area.   

For me you have to watch some key areas in consumer and commodity stocks for more info.  Basic commodities are not following the bull scenario in spite of the hype.  Oil has failed to break out of the 85 dollar top and grains are pointed lower.  Yesterday the CNBC crowd was pushing Ag stocks like Monsanto, Mosiac, and Potash Corp.  To me they appear to be struggling and are ready to roll over.

Some other indicators point to late stage exuberance in the market.  The ETF XLY, discretionary consumer stocks, has had a late stage burst but is well below the 2007 and 2008 highs. 

We do see that the employment situation which has been the laggard area since the 2009 market bottom is now staged to improve and probably somewhat dramatically over the next six months.  This will be good for the Democrats in November and especially so if the Financial Regulations bill is passed as this is the area that the guy on the street is really concerned.

And lest I forget, the Gold / Dollar scenario is what we have seen as being the big surprise for this year, we are on the verge of seeing that big time indicator break out as the dollar pushes higher and the gold crowd capitulates.

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