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The news this morning was very encouraging. I expected a little pullback and we barely dipped into negative territory before reversing. As that mentioned last week, this morning’s low should be bought.
China’s PMI was much better than expected and it came in at 53.1. This was the fourth consecutive monthly rise and commodity stocks will like the news. Many analysts are still expecting a reduction in bank reserve requirements. That will also produce a nice pop when it happens.
Europe’s PMI was a little soft, but that was expected. Germany’s activity declined and that weighed on Euro markets slightly.
Last week Spain released its 2012 budget and the EU was satisfied. Eurocrats increased the “firewall” by €200 billion (currently €700 billion) and that should pacify credit concerns. Germany’s Central Bank denied rumors that it will stop accepting PIIGS debt as collateral. Some of the European banks have hinted that they will pay back LTRO loans in 2012. All of this news is positive.
This morning, ISM manufacturing came in at 53.4 and that was also better than expected. Manufacturing is starting to rebound. ISM services was strong last month and the release should be strong on Wednesday.
During the last four months, the market has rallied on the ADP release. So much so that the Unemployment Report has not generated much of a move after beating.
Private sector job growth has been very strong and traders will buy ahead of the number. Initial jobless claims have been falling for two months straight and the employment picture is improving steadily. The market will be closed Good Friday and traders do not want to get caught short during the release. They will buy stocks now.
The weather across the US has been very warm and construction workers are back on the job much earlier than normal. Analysts are projecting 217,000 new jobs in March and I believe that number is low.
After Easter, Q1 earnings season will begin. Alcoa posts its results on April 10th. There have not been many warnings and Asset Managers will aggressively bid ahead of the releases. For 10 straight quarters the market has rallied into earnings season.
I told you last week that I would be aggressively adding to long positions this morning. I have two thirds of my normal risk exposure and my call positions are unhedged. As the market pushes towards SPY 146, I will start scaling out of my long positions.
You should have a nice portfolio of bullish positions. Enjoy the ride.