The dollar rallied overnight to 81.25 pushing oil and commodities lower in overnight trading. That reversed early this morning with the dollar index falling to 80.48 by midday and pushing commodities higher. Gold gained +19 to 1138 while oil rebounded to gain +1.86 to 80.55. That level has been resistance for more than a week and the EIA inventory report is due out tomorrow. Expectations are for a +1.5 million barrel increase and the fifth straight weekly gain.

The economic reports today are limited to the weekly Chain Store Sales, which came in at -0.8% and the monthly auto sales data for February. Chain store sales were hurt by the blizzard that blanket the northeast.

The auto data expectations are for a 10.3 million annual pace. That is down from 10.8 million with the 500,000 drop due to the three blizzards in February that kept auto shoppers home in front of a heater.

Early reports from Ford showed they sold 142,285 vehicles in February. That was a +43.1% surge that pushed Ford to number one in sales in the U.S. and the first time it was number one in 12 years. Ford car sales surged +54% while truck sales rose +36%. Market share in the U.S. rose to 17%, nearly 3% higher than February 2009. Ford said it planned to build 595,000 vehicles in Q2, up by 144,000 since Q2-2009. Ford is on track to build 570,000 in the first quarter.

GM reported an 11.5% rise in sales to 141,951 vehicles including the brands GM is dumping. Without Pontiac, Hummer, Saab and Saturn the core GM sales were up +32%. Buick sales rose +47% to 9,121 vehicles while Chevy sales rose +32% to 99,999 vehicles. Despite all the bad news Toyota sold 100,027 units, -8.7% from February 2009. Sales of the Prius rose +10.2% to 7,968. Toyota is recalling more than 8 million vehicles.

The British pound dropped again in overnight trading after hitting a 10-month low of $1.4781 on Monday. The -1.67% drop was the biggest drop in four months. Investors worry that the coming election will split the parliament giving neither party a majority.

Chart of the pound

Ireland's largest financial institution, Allied Irish Banks PLC, reported its first ever full year loss on Tuesday as bad debts soared. AIB lost $3.25 billion in 2009 compared to a 772 Euro profit in 2008. The bank said 29.4% of its loans were delinquent. This represents E38.2 billion. However, these numbers were better than expected and the banks shares rose +4.2%.

Toyota (TM) announced it was recalling 1.6 million cars for leaky oil hoses. The company can't seem to get a break and after all the high profile recalls they feel obligated to report/recall every little thing in order to stay out of trouble with regulators.

CF Industries (CF) launched another hostile bid for Terra Industries (TRA) in hopes the higher price would breakup the deal between Yara International and Terra. CF offered $4.75 billion for Terra. That would equate to $47.40 per share in cash and stock. The Yara bid is for $41.10, all in cash. Shares of Terra gained +4.76 to $45.96. Yara will have five days to decide to raise their bid once the Terra decides the CF bid is superior.

The Nasdaq continues to lead the other markets higher with another +14 point gain to 2288 at lunchtime. The next real resistance test is still 2325. The +100 point rally in techs since the Thursday morning low last week is starting to look very overbought. At this pace I doubt it will have the energy left to break that 2325 level without a pause to refresh.

The Dow is rising at a much more sedate rate with only a +34 point gain at 1:30. Just over resistance at 10400 the Dow is being held back by 11 stocks with Wal-Mart the biggest loser. Other decliners are IBM, MSFT, HPQ, INTC, T, PFE, CSCO, DD, HD, BAC. It is interesting to note that the big cap tech stocks in the Dow are in negative territory. This does not bode well for the Nasdaq's chances to continue its advance.

The S&P finally broke through the resistance barrier at 1115 and is currently sitting at 1122 with a +7 point gain. Breaking through 1115 should produce some short covering before the close and could be a strong indicator of a continued market rally IF the S&P can hold over that 1115 level until then.

Another breakout indicator is the NYSE Composite index. This index has been lagging the rest of the market for two weeks with strong resistance at the 100-day average. That resistance was strongly broken this morning with a +65 point gain to 7167 and still rising. I view this as strongly bullish news.

NYSE Composite Chart

Confirming the NYSE breakout is the rally in the Russell 2000 to 650 and the resistance high from January. If the Russell moves over 650 this should produce some serious additional short covering and lead all the markets higher. This would be very bullish.

Russell 2000 Chart

It appears that the markets have broken out of their high volatility doldrums for last week and they are moving to new levels. The lagging Dow and the Dow transports, currently negative for the day, are the only points of concern. The transports would be the third leg of confirmation of a move higher but that is not happening today. That should be a warning that everything is still not 100% and this rally could fail. I believe the Russell and NYSE gains will trump the transports and we should be seeing the glass as half full rather than worrying about the ramifications of a transport decline.

Jim Brown