Todays Economic news is not the best. The overall economy contracted by more than 6% in Q1, a lot worse than expected. The silver lining is that a big chunk of the contraction was inventory depletion, which sets the stage for future growth. The GDP and unemployment statistics are coincident indicators. What the market should be looking at is the Leading Economic Indicators, which are still not indicating a recovery. http://www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1
The market psychology is pretty positive. It is ignoring the bad news, and looking for the good news. The six week rally has great breadth, which shows conviction. All that is needed is a strong upward signal from the Leading Economic Indicators,and a conviction that the Banking Crisis is behind us. There will be plenty of gloomy economic news for the next several months in the form of increased unemployment, but the market will ignore that if the Leading Indicators begin rising.
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