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10-year YIELD takes out recent high

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Retail sales stronger than expected

April retail sales numbers came out this morning and showed a rise of 0.8%, which was much stronger than economist's prediction for a 0.1% gain. Equity futures rose fractionally after the release, but remain mixed. Currently we're seeing S&P 500 futures trade lower by 3 points, NASDAQ futures are down 8.5 points and Dow futures are higher by 15 points. Bond YILEDS are higher across the board this morning on the three major maturities we follow on a daily basis. Yesterday we witness a fair amount of selling in treasuries and it came in the latter part of the session. The 10-year YIELD is firmly back above our waterline for YIELD on this bond of 5.2% and current YIELD on the 10-year (TNX.X) is 5.327. Our feeling is that a YIELD on this bond above the 5.2% tells us the market is selling the bond and this money is rotating into stocks. Fair value for the S&P 500 today is $3.52. That price will not change during the day. Computers are set for program buying at $5.12 and set for selling at $2.12.

Where's the money going?

We've believed for some time that money has been flowing into the deeper cyclical stocks and even the retailers. Perhaps today's economic data at the retail level has us on the right side of things currently. On April 24, PremierMarkets.com profiled shares of Dow component Wal-Mart (NYSE:WMT) as bullish when it was trading on a pullback near $50.95. We continue to like the stock here and its current supply/demand characteristics. Longer-term bullish price objective remains $61. We follow the stock daily for subscribers.

Recently, PremierMarkets.com also highlighted shares of Dow Component Du Pont (NYSE:DD) as a name that traders and investors should be watching to the bullish side. This goes along with our belief that the deep cyclicals must do well if technology stocks are to benefit months from now. On May 1st, we profiled the stock bullish at $45.02 and yesterday shares of DD made a nice move to a high of $47.84 and finished the session at $46.97. We felt bullish traders would be targeting the $59 level, but should follow with a stop at $41. We've been following this trade for investors on a daily basis also.

Jeff Bailey
Senior Market Technician

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