Dow hits new high of 8512.28. January high was 9034.69.

Market forces May 7,
The Dow Industrials Index is now within 523 points of breaking its January high of 9034.69.
Similarly the DJ Rails Index is at 3404.11 and only needs to break its January high of 3717.26.
That means with as little as a 9% rise in the DJR from current levels this rally could signal the end of the Obama depression as Jim Cramer has been predicting with a Dow Theory buy signal that a bull market has begun. That will be the shortest depression in history and perhaps will be called the Obama panic instead of the Obama depression. Even FOX news is bullish on the stock market now saying, “Stress-Free Markets Rally.”

Government bonds dipped on and 10-year yields edged up from one-month lows, as the rally in global equities this week has been supported by some investor selling of safe-haven government debt. That will raise all government debt interest payments. Sadly the people most concerned about safety began buying stocks after the market already rose 30% and is poised for a decline. The selling pressure on treasuries will make the expense of government debt rise rapidly because the interest rate had been close to zero for a few months now. That will sharply increase future deficits by increasing the cost of servicing many $trillions in world government debt.

Market Manipulation:
Yesterday the stock gains were primarily in the Banking sectors of the market indices. The Technology area stalled indicating a rotation out of the technology stocks may have started. We will have to wait and see. Coffee stocks also seem to be pumped up several hundred percent over the last month. How can some of those stocks now be two and three times higher in price than they were when before two years ago when Starbucks peaked? Is that the sign of the end of the rally that Jim Cramer warned about? No one seems to be able to explain why coffee bean stocks been favored like technology stocks. They are still losing money.

Economic signs:
The economic inflection point could have been passed in April or the April data could be just a scatter point in the normal data variation. If May confirms April then the bear market that began 17 months ago could be half over. An inflection point is when an advance or decline passed the point of its highest rate of change as when layoffs went from over 600,000 per month in February to under 500,000 per month in April. Yes, 500,000 is still an awful high number but still an improvement. If it holds in May it could mean this bear market only has less than 17 months to go. I remember when Bush was criticized for layoffs of 60,000 per month.

Market Outlook

Last night's results: China is up 0.2%, Hong Kong is up 2.2%, India is up 1.3%, and Japan's market is up 4.5%.

European markets are also up in the range of 1.6% to +2.4% mid way through their day.

US futures indicate the markets will start higher today.

We recommend cherry picking back into the market during retrenchments. This however still is not a long-term investor's market. The markets could easily hit a new low in the next three months.

Ben Bernacke is a broken clock that always tells the same time. He is always saying the economy will recover six months from now. This past winter he said the economy would turn around by mid 2009 and now he says by the end of the year. To him the recovery is always around the next corner.