Poor Economic Data... But Nothing Stopping The Stock Market Bull

Stock-Markets / Stock Markets 2013 May 18, 2013 - 03:58 PM GMT

Poor data, again, late in the week couldn't get the market to stumble very much. Some, yes, but in a big way, no. We saw the number from the Philadelphia Fed come in below the zero level again after going green the prior month. Minus five, and change, showing their economy is in recession for the very short-term at least. On top of that, we then saw a huge increase in the jobless claims number. Thirty thousand bump up and well above expectations. The type of one-two punch that should knock the market down, but once again it did not, while the majority scratch their heads wondering why we all know the reasons by now. There's nowhere else to go. Interest rates are too low and the liquidity machine on every day all day long. A lethal one-two punch the bears are not able to overcome at this point in time.

The bears obviously feel the angst of trying to take the market lower when no matter what news comes out, things try higher over time. The lesson being never short a bull market with any force and never go long in a bear market with the same type of force. Just follow the trend and, for now, the bears are sitting back as they just can't make any head way. Today was a microcosm of what's been ailing the bears. They get a nice move lower late in the day yesterday only to see the bulls jump right back in the saddle today. A good day for those bulls today as the overall up trend is firmly in place.

The commodity world, the SPDR Gold Shares (GLD) and iShares Silver Trust (SLV) world in particular and why not, throe in coal, are just acting horribly. So why the drop in those stocks if we have inflation? Someone asked me that today. The feds flooding of dollars is for the banks. If the banks can't get that money out to the right places, it doesn't add demand for those commodities in our country or the world for that matter. It appears the world is still struggling along meaning demand just really isn't there. These stocks struggle while the market finds bids elsewhere in our low rate environment. Sure, health care rises. That's not coal. You get the point. The answer is really simple. Inflation exists in the wrong places because the world economies still aren't rocking along. When they do, coal and some of the other dead commodity stocks will finally get rocking along with the rest of the stock market.

When bull markets make important breakouts they will get overbought. In some cases very overbought. That's always a red flag, for sure, but there's always the possibility of chasing performance by those who have been bearish or out of the market and, thus, overbought can stay that way for a very prolonged period of time. A lot longer than anyone, including yours truly, would think possible, which is why you always have to have some exposure on the long side. It doesn't mean you have to be fully exposed, but you do want some exposure at times like these.

You have also been prepared for selling, and some that may be a bit more intense than you'd like but the market is on breakout and, thus, you have to recognize that we may stay quite overbought for some time to come. As long as we stay above 1597 on the S&P 500 longer-term then you have the bull market still alive and kicking. Adjust accordingly. When you study the charts this evening, they are quite self-explanatory. Take the time to look them over and understand what's taking place. You may not agree with it, or honestly understand it, but the lesson is to never fight what you see, even if you think it's inappropriate. I think it is but I never fight it.

Have a nice weekend.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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