Wednesday, April 14, 2010 EST
From First Trust Advisors:
Implications: Headline figures on consumer prices remain benign, but trouble is brewing deeper inside the inflation report.

Overall consumer prices are up 2.3% in the past year. Even better, according to the inflation “doves,” is that “core” prices, which exclude food and energy, are up only 1.1% versus a year ago. But we do not believe this is the important part of the report.

Instead, we think “cash” inflation better gauges the pain consumers are feeling. Cash inflation counts everything, including food and energy, but takes out something called “owners’ equivalent rent” or OER – the government’s estimate of what homeowners would pay if they rented their own homes. Remember, OER does not reflect an actual transaction; if OER goes up, no one has to pay anyone else any more money.

Excluding OER, consumer prices are up 3.2% versus a year ago, higher than the overall index or “core” CPI would have you believe. The financial and economic panic of late 2008 and early 2009 got the Federal Reserve to cut short-term interest rates to, effectively, zero percent. As the economy recovers, that policy stance is becoming more and more inappropriate. Loose money from the Federal Reserve will eventually cause all these measures of inflation to increase substantially.

Full report here

Thursday, April 8, 2010 EST
FER Value of the Market

Ford Equity presents market forecast by DK Technicals

In our final Weekly Review for 2009, we sketched out what we believed was the most likely projection for the SPX in 2010 and we reproduce that chart at the top of this page.  The bold line was our preferred trajectory for the index but it didn’t work our as we expected.  The index did see a sharp decline from a January peak and it did post a meaningful low around our February 4th turn date (actually on Feb. 5th) but it was not nearly as deep as we expected.  Also, the ensuing bounce carried to new recovery highs, which although we made allowances for it, was not what we expected.  This brings us to the alternate scenario whose initial stages were sketched out by the broken chart line.  So our best projection now is that the SPX is heading for an April 5th peak that is likely to roll over into an interim low around May 28th.  We’ve given a target for that peak around the 1228 area, which is the 62% retracement level from the ’07 highs.  Whether that target is attained within the time allotted is unclear but we would place more emphasis on the turning point provided by the cycle date than the actual price target.

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