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OPINION

Market Takes Off...Now What?

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.
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The market takes off like a rocket, and it happened on good economic news while crude oil is gaining momentum.

Crude oil closed right on a big resistance point so a further upside would be monumental, possibly lifting the commodity to $37.00 – a clear breakout. I am not sure how the rally continues through that point of $40.00 without major concessions from Saudi Arabia and the Organization of the Petroleum Exporting Countries (OPEC).

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Fed’s Wild Guess

There is also the notion that oil moving higher is a proxy for the global economy, at the very least moving away from recession. It might be a stretch, but it remains a narrative. Ironically, the Atlanta Fed lowered its 1Q16 GDP forecast again yesterday. Since February 25, the estimate has dropped from 2.5% to 1.9%- it will be revised after Friday’s jobs report, but it’s not the stuff of rate hikes.

Date

Major Releases

GDP

1-Feb

Initial now cast

1.2

3-Feb

ISM Nonmanuf. Index, Auto sales

1.4

4-Feb

Manufacturing report (M3)

1.5

5-Feb

Employment situation, Foreign trade

2.2

9-Feb

Wholesale trade

2.5

10-Feb

Monthly Treasury Statement

2.5

12-Feb

Retail trade, Import/export prices

2.7

17-Feb

Housing starts, Industrial production

2.6

19-Feb

Consumer Price Index

2.4

23-Feb

Existing home sales

2.4

24-Feb

New home sales/construction costs

2.4

25-Feb

Advance durable manufacturing

2.5

26-Feb

GDP, Person Inc./PCE, Adv. intl. trade

2.1

1-Mar

ISM Manuf., Constr. Spend.

1.9

Breadth

All of a sudden, shorts are scrambling in addition to hedge funds (often one and the same), which had an awful year in 2015, and cannot afford another poor showing. One thing bears should be concerned about is the composition of leadership in the current rebound.

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Blue-chip names with single-digit price-to-earnings ratios and other ultra-low valuation metrics are leading the way. On the NYSE; once again, there were two times as many stocks reaching new 52-week highs than lows while NASD was just the opposite and had fewer overall advancing stocks.

Breadth

NYSE

NASD

New Highs

53

37

New lows

26

68

Advancers

81%

73%

Decliners

18%

24%

Technical View

The Dow has broken through key resistance and it looks to be on its way to 17,100, which is the number I suggested. If this rally falters now, it would be a dagger in the heart of bulls; reluctant investors have been holding on for dear life.

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