The Markets

The markets turned in another strong performance last week. In fact, our main indicator, the New York Stock Exchange Bullish Percent, changed back to positive after being negative for about six weeks. The New York Stock Exchange Bullish Percent is calculated by taking all the stocks whose charts are on a buy signal and divide them by the total number of stocks that trade on the NYSE. This gives us a figure that, when plotted on a chart, can tell us if market conditions are getting stronger or weaker. It also gives us an indication whether stock prices are overvalued or undervalued.


This is good news for investors. It appears that the recent pullback in May was a healthy pause, as markets have turned upward. The beginning of second quarter earnings reports are about three weeks away. The markets will definitely be looking to these reports for reasons to continue climbing.

Consumer prices fell an unexpected 0.2% in May even though many commodity prices such as fuel, metals, and food are rising. This has the effect of squeezing company profits as their cost or production rises faster than they can raise prices. This is especially true when the economy is recovering from the current recession. Businesses are reluctant to raise prices on consumers when demand is still weak.

Rising commodity prices is further proof that the economy is picking up steam. In fact, the Wall Street Journal recently reported that while states such as Nevada and California are still struggling with high unemployment, much of the south and Midwest is experiencing an uptick in hiring as manufacturing increases. If this trend continues, we could see a strong rebound in the market as earnings are released over the next couple of months. Remember, the market is a forward looking indicator.