An African American is being inaugurated President on Martin Luther King Day. Americans should never be complacent about that. This President certainly isn’t going to have it easy as the first fight of the year is the debt ceiling where the GOP has fired the first shot for a three-month extension. We are not going to get into a blow by blow, but we are going to follow whether the bears play volleyball on each twist and turn.
There’s been a lot of noise coming out of the gold market as people seem to think it's set to rally. I’m not as sure as every turn higher is greeted with hope and optimism. A bull would prefer a stealth move. It’s off to a decent start up but has serious resistance to about $1,720 and it’s not a given that it will break through. The Greenback is also attempting a breakthrough, so both of them are not likely to do it. So if gold and the dollar are in a stalemate, which is going to play tiebreaker?
Perhaps the chart of the week comes from Europe. As we know the European indexes have been leading to the upside and given us an important violation of the October time windows, which has led to breakthrough for not only the Russell 2000 but last week the SPX that is at a post-financial crash high. It’s an important signpost if you are considering the new secular bull market case. But Germany had a tough week. Overall, Europe looks decent except for Germany, which for whatever reason is flat and it has made some people nervous. The economy shrank by 0.5% after a meager gain of 0.7% the quarter before, which means GDP for the whole year was just 0.7%. But the DAX was flat while the FTSE and CAC made new highs. The week started out good, so we can expect more of the same over here. While we are looking at numbers here’s what’s happening on our side of the pond.
Consumer sentiment came in at 71.3 as opposed to 72.9 from the month before; this is the lowest reading in a year. The Philly Fed numbers for the Mid-Atlantic region really dropped from 4.6 to -5.8. But the market didn’t get hit. These are the lousiest numbers we’ve had in a while but the stock market doesn’t represent it. The reason for these numbers is blamed on the Fiscal Cliff negotiations, which hampered confidence.
And these markets are at new highs? Folks, I have to tell you that if these markets are at new highs with such terrible numbers that could only mean one of two things. First, it means we are climbing a wall of worry and the better economic times are six months out because the market is an economic leading indicator. However, what concerns me is the paltry German number after a good market year. True, we are a year out of an extreme crisis and these numbers reflect the pullback in April and May, not to mention the 4th quarter of 2011. But one would think the numbers should be better. So the United States and Europe each have different issues but similar results when it comes to economic numbers.