Stocks Rally as Dollar Falls, Manufacturing Grows, home sales decline, and Oil Climbs Above $80

World Outlook
Starting December 2008 shortly after Obama told workers in Peoria that Caterpillar would be hiring soon, Caterpillar cut about 18,700 full-time jobs and about the same number of temporary workers as the global recession reduced demand. The Peoria, Illinois-based company predicts 2010 sales will increase as much as 10 percent. Most of the Caterpillar sales business is overseas in Asia.

Market Outlook:

This current stock market rise off the March 2009 low has the look of a bear market rally comparable it to the bear market rally and subsequent collapse of 1930. The recovery did not come in 1930, in fact the Great Depression had barely started, and the stock market suffered losses of another 85 percent measured from the interim bear rally high of 1930 (where we are by analogy today).

The final numbers are in. The Obama ‘cash for clunkers’ program last summer resulted in the sale of 320,000 Japanese vehicles in the U.S.

The Institute for Supply Management’s factory index rose to 55.9, the highest level since April 2006, according to the Tempe, Arizona-based group.

Spending on construction projects dropped 0.6 percent in November, to the lowest level in more than six years, the Commerce Department said today in Washington.

Tuesday, Jan.5:
Factory Orders
Pending Home Sales

Wednesday, Jan. 6:
ADP Jobs Report
FOMC minutes

Thursday, Jan. 7:
Unemployment Claims

Friday, Jan.8:
December unemployment report


Market forces January 5, 2010

We estimate the NYSE must rise 1.1% from yesterday's close to be interpreted as a real rally not a declining head and shoulder sell signal. That reflects both the price change and volume of shares being traded. At this point it appears the rally is over. The next sell confirmation will be if the neck resistance level (of the head and shoulders formation) breaks down on the volume adjusted NYSE market cash flow index. The modified MACD indicator gave a sell signal.

Asian markets were up slightly over night; China holiday, Hong Kong up 2.1%, India up 0.7%, Seoul down -0.3%, and Japan up 0.3%.

European markets are up with the average in a range from 0% to 0.4% this morning about half way through their day.

US pre-market futures flat at about -0.2% today at 6:30 AM EST.

There is a similarity between the 1930 rally and 2009's rally. From the March low the S&P 500 has soared 69 percent in nine months. In doing so it recovered a bit more than 50 percent of its former losses. But it's still 27 percent below its all time high of October 2007. Yes, the market rallied strongly in 2009. But it did the same thing in 1930. History then tells us that the current stock market rally is not sufficient to believe that the worst is over. We have inefficient nationalized medicine on the plate with 50 million new entitlements for indigents and illegals who do not share the American work ethic, and $trillions of debt burden to give Acorn and other indigent socialist supporters pretend jobs that pay them with real taxpayer's money to vote for socialists. In former socialist countries and many current socialist countries (even Iran) if you do not support the regime you cannot have a university education or a decent job. Government jobs are how dictators stay in power. That is why intelligent people flee socialism. That is why so many British, Canadians, Europeans, and Indians try to become American citizens. They used to call America the land of opportunity.

We are now preparing for a possible market decline in early 2010 that could take prices down to at least the old high where stocks were at the end of May seven months ago. The last two Januarys have been quite ugly although in 2009 the market surged more than 2% on the first January market day.