The tape is telling us that the major U.S. market indices are now in a clear technical rally. It is not exactly clear as to why this is happening, but both the DOW and QQQQ are technical-indicator longs while SPY is moving close to the long side. (A technical bounce for the dollar is perhaps helping.)

This is the kind of technical rally you should feel free to trade IF your horizon is relatively short. However, the emerging fundamental situation seems just too bearish for there to be a sustained upward trend. Consider that: 

1. The U.S. economy continues to slow and the situation of consumers continues to deteriorate 

2. The Japanese economy has begun yet another retreat 

3. Inflation is a significant problem in the eurozone that is constraining the ECB from cutting interest rates as economic woes mount. 

4. Global cost-push inflation in the form of fuel and food price shocks continue to take their toll both economically and in terms of increased political instability. 

5. Everywhere I go, Main Street cabbies, restauranteurs, merchants, et.al. are all telling me about how slow things are. Doesn’t matter whether I’m in Newark or Halifax or Chicago or Vancouver or the OC. 

On top of this, the presidential race is motivating politicians to embark on large scale bailouts that are going to create a fiscal drag on the U.S. economy, likely for years to come. 

QUICK TAKES

1. My ruminations on Clinton-Obama have dramatically increased my hate mail. To further fan the flames, check out my oped scheduled to run at www.provojo.com on Tuesday, April 8. 

2. Please send me your ideas on how to play the higher food prices in the market. Any good restaurant stocks ripe for a short? 

3. The latest Congressional bill for a real estate bailout includes billions for the developers in tax breaks for losses taken. This is the height of both stupidity and corruption in Congress. No wonder we can’t balance a budget. 

“Any trader or investor who ignores the power of macroeconomics over the world’s
financial markets will, sooner or later, lose more than they should—and if they are
trading on margin, perhaps more than they have.”
 -- If It's Raining in Brazil, Buy Starbucks

The Market Edge Market Summary from www.marketedge.com 

CONTACT INFORMATION
Peter Navarro
Irvine, California USA
Email  |  Website

DISCLAIMER: This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling, or holding of any financial instrument whatsoever. Trading and investing involves high levels of risk. The authors express personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The authors may or may not have positions in the financial instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future performance.