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Consumer confidence and PMI; both near consensus

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This morning's economic data has bulls sighing relief as the Consumer Confidence Index slipped to 108.8 in April from the 110.2 level of March, but was in line with economist's estimates looking for a reading of 108.7.

The Chicago PMI fell to 54.7% in April, just a bit below the 55.0% consensus. The slipping lower Chicago PMI will most likely draw some concern from bulls that the manufacturing sector is not building on its early 2002 recovery, some economists feel today's number is still a "good number" and its too early to conclude that the manufacturing rebound is running out of steam.

Morgan Stanley Cyclical Index Chart - Daily Interval

While its good to see the CYC.X participate in today's stock rebound, it looks like it may take a few sessions for some basing action to take place here. Since the September lows, the cyclicals have been one of the stronger areas of the market, but recently came under pressure when economic data showed that the bulk of economic strength was coming from inventory rebuilding and not renewed corporate spending spurred by broader economic demand. This morning's 1.3% rebound in the CYC.X is close to matching gains in many technology sectors that have seen far more selling in recent weeks. This hints that the rebound in technology today is most likely short-covering and bulls most likely sticking with those stocks/sectors that have treated them well in recent months.

Jeff Bailey
Senior Market Technician
Option Investor

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