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There is Little I Can Write About Yesterday’s Market Action.

There is little I can write about yesterday’s market action.  A report showed there was the biggest ever jump in durable goods orders and consumer confidence unexpectedly increased.

Commenting upon the former, a huge order for commercial aircraft was the reason for the rise in durable goods. Non-military capital goods and excluding aircraft, orders fell by 0.5% versus a 5.4% gain the month before hence suggesting orders may not be that robust.

Regarding confidence, confidence did rise to the highest level since 2007.

During the past three weeks, the S & P 500 is up about 7% reversing a 4% YTD decline.  For the past thirty days, this benchmark is up 1.2%.  The rationale for the rally—accommodative monetary policy forever and massive cash balances searching for a more efficient use.

For many this year has been frustrating as the sector rotations have been great.  The benchmarks trade to new highs, propelled by one sector and then trade lower, a decline predicated by a different sector only to rally back to its highs under the impetus of yet another.

Some might call this a trader’s delight but the simple fact of the matter frustration is rising given the absence of any definitive trends.

Volume has been anemic at best thus suggesting both the rallies and declines lack conviction.

The only certainty in life is change.  I will continue to argue economic growth may consistently surprise on the upside given these massive cash balances, growth that may increase the odds of demand pull inflation via an acceleration of monetary velocity.  In my view all that is missing for such acceleration is confidence, confidence primarily in government.

If confidence rises so do the odds of greater monetary velocity and higher stocks prices with conviction, not these whoosy rallies so prevalent thus far this year.

Last night the foreign markets were mixed.  London was up 0.09%, Paris down 0.11% and Frankfurt down 0.10%.  Japan was up 0.09% and Hang Sang down 0.62%

The Dow should open little changed.  The 10-year is up 5/32  to yield 2.38%.


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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.