Short-Term Key: Negative  Long-Term Key: -81 (Neutral-to-Negative)Read more...

Short-Term Key: Negative Long-Term Key: +48

Over the weekend, representatives of the G8 nations got together for a confab. Their main concern was how to eventually remove some of the many trillions of dollars worth of stimulus injected into the world economy over the past year or so by both government spending and central bank easing. (For some reason, however, this was strictly a government meeting - central banks weren't represented.) Frankly, we think this is a little bit like worrying how to spend all the money you'll get when you win the lottery – a little premature.

Right now, we're still looking for green shoots of economic recovery. Admittedly, there are a few. But they tend to be overshadowed by things such as unemployment reaching 9.4% in the U.S., and surging in other developed nations too. You must remember that unemployment is a lagging indicator, which means the number of people out of work may not yet have reached its peak.

To be fair, one undeniable green shoot has been the rise in commodity prices, especially industrial raw materials. Typically, wholesale commodity prices correlate very strongly with corporate profits. The industrial commodities index over the past 13 weeks has been rising at a record high rate – over 26% - which bodes well for profits.Read more...

Stocks finally rallied last week, with the Dow gaining more than 3.5%. But the rise was certainly long overdue, considering that the market was technically more oversold than it has been since 1980. Coincidentally, we were dealing with a commodity crisis in 1980 too. The difference, of course, was that back then the commodity crisis was nearing an end. Today, it will go on for a lot longer, and get a lot worse.

Still, last week the market was certainly ready to react to good news, and good news it got. To start with, the 11% drop in oil prices gave stock owners reason to turn optimistic. Why did it happen? We can't say for certain, but perhaps the progress on the Iranian situation helped. So did the increase in oil inventories, which followed six or seven weeks of drawdowns. Perhaps even the plan to prop up Fannie and Freddie made people feel a little more secure about the economy.Read more...

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Today may be Valentine’s Day, but we think the market is more in gear for April Fool’s Day instead. In other words, you need to look closely at what’s happening to avoid being misled.

For example, on Thursday people got very excited by news that the U.S. trade deficit was only $56.5 billion in December, down from $59.3 billion in November. No doubt this drop was the result of lower oil prices in December. But with oil already recovering, we don’t see a real change in the trend. On a yearly basis, the 2004 trade deficit was $617.7 billion – an all-time high.

Nor do we think the new Federal budget marks the start of a new period of fiscal restraint. Cutting back on spending is always a hard sell, even when it’s your second term in the White House.

Last week oil rose to $47.80, apparently breaking the short-term downtrend that began three weeks ago. And the Dollar Index had a bit of a turndown mid-week. Normally under those conditions, you’d expect stocks to fall. But instead the S&P closed up from the week before.Read more...