Last Friday’s action in the markets contained a wealth of information. For one, the headline economic news could not have been any friendlier to the growth and equity bulls (real GDP came in at 5.7% QoQ annualized in Q4, UofM consumer sentimentindex at a two-year high, and the Chicago PMI hits a four- year high. But the good news didn’t just come from the economic data; last week also saw the release of the iPad, Bernanke finally received his reconfirmation from the Senate, and President Obama managed to find more shekels in the cookie jar to top up the $787 billion stimulus with more vote buying goodies such as a $5,000 tax credit to companies for each net new worker they hire and reimbursements for pay hikes. But look what happened on Friday despite all this good news on the economy, Bernanke and evenmore pledged stimulus! The markets, which had initially rallied impressively on the data, but sadly on low volume, then proceeded to turn down substantially — and the selling was on sharply higher volume. If you are bullish on stocks, that is bad news. The Dow, which at one point was up 117 points, ended up tumbling 164 points from the intra-day high in what was a very important outside-reversal day. The Dow, which first crossed the 10,000 mark back in March 29, 1999, is about to make another run at it on the downside. It still amazes us that the index has basically just been moving sideways on either side of that line for 11 years now.
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