Friday, April 29, 2011

Stocks End April Positive; Gold Screams, Silver Supressed

On the surface, it's safe to say that April was a pretty good month for stock holders and traders.

The Dow, S&P and NASDAQ are all at multiple-year highs and finished off what may have been one of the most mangled months in stock market history with another day of broad-based gains (with the slight exception of the NASDAQ, weighed down by some lofty valuations).

For the month of April, the Dow gained some 490 points (3.98%) as investors flocked to blue chips. The S&P 500 added 38 points (2.87%), while the NASDAQ moved 92 points to the upside. The NYSE Composite, the broadest measure of market health, grabbed 267 (3.18%) of gains.

Naturally, the assumption is that stocks gained on the back of easy Fed policies, and outpaced inflation, but were trampled by commodities, especially silver and gold, which continued to be among the safest and best-returning investments of the year.

Keeping some perspective, in relation to the weakening US dollar, stocks merely held their own, as the dollar index, which closed today at fresh 3-year lows of 73.12, lost 3.60%. Thus, when measured against an inflation indicator such as the Dollar Index (DXY), most stock traders lost money in real terms. The true measure of value was in the precious metals and other commodities, things that one can actually touch, feel, see, and potentially use for some other purpose.

April being traditionally the final month of the year to make profits in stocks before October, the gains across the swath of the indices are not surprising at all. In fact, had stocks not gone higher, it would have been a shocking event. With the Fed set to end QE2 in June and hinting of higher interest rates, the top may be close at hand for the majors.

However, being that all manner of policy is tied to a strong stock market, since every pension, trust and endowment has money invested in stocks, there's little likelihood of a summer crash, unless the deterioration in the dollar continues apace. The Fed's ending of QE2 will more than likely stop the slide in the dollar, though it's still a gamble that the economy is strong enough to get along without outside help. The Fed stands ready to intervene at any signs of weakness, and there are plenty of them.

Individuals, those sentient beings otherwise known as humans, who eat, sleep, and generally are the driving force behind all economics, are not faring as well as their investments. Personal income was reported to have increased at 0.5% in March and the same may be true for April, but it's hardly keeping pace with inflation, which is running at a rate of between six and nine per cent annually. Food and energy prices have been the biggest contributors to the poverty effect that has overtaken the middle class, and there seems to be no end, though tighter monetary policy may have a calming effect on rising prices.

This is all going to play out over the summer, which appears to be shaping up as something of a spectacle. Along with watching the Fed's every move, the adroit consumer/investor must keep an eye on our nefarious congress and the golf-fanatic president, and how they handle the debt ceiling and the 2012 budget.

There are also the twin monsters of the housing market and unemployment, two stubborn enemies that will not easily be vanquished. while housing is something of a double-edged sword, hurting existing homeowners while helping new ones with lower prices and record low interest rates, unemployment is a stickier issue. Jobs just don't spring up from the ground, though farming may become one of the better ways to lick the whole rat race from an individual standpoint.

Still, there are simply not enough new jobs being created in the US to sustain the population that is able and willing to work for a living and the ones being created are not as good as many just a decade ago.

Dow 12,810.54, +47.23 (0.37%)
NASDAQ 2,873.54, +1.01 (0.04%)
S&P 500 1,363.61, +3.13 (0.23%)
NYSE Composite 8,671.41, +31.68 (0.37%)

On the day, advancing issues outperformed decliners, 4084-2465. On the NASDAQ, there were 200 new highs and just 20 new lows. Over at the NYSE new highs beat new lows, 361-13. Volume was actually elevated, possibly due to window-dressing, or funds squaring positions and closing out EOM books.

NASDAQ Volume 2,486,112,500
NYSE Volume 4,012,242,750

Crude oil continued its relentless climb, adding $1.07, to $113.93 per barrel. Gold was the outright winner of the day, gaining, at the moment, $26.60, to $1562.40. Silver, however, did not follow, as the price-suppression machine kicked into high gear, supposedly to keep it from the $50 threshold and destroying April shorts. Silver is currently down 62 cents, at $47.86. Those calling for an investigation into price-rigging in both the gold and silver markets can use this day as an obvious example.

All of this is merely a dress rehearsal for the month of May however, which will start with non-farm payrolls for April next Friday and at some point include a hot debate of the federal debt ceiling. The old saw, "sell in May and stay away," will be tested.

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