Home > Zacks’ Voice of the People Highlights Opportunities with SPDR Dow Jones Industrial Average ETF, The U.S. Oil Fund ETF and The United States Gasoline Fund ETF
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Zacks’ Voice of the People Highlights Opportunities with SPDR Dow Jones Industrial Average ETF, The U.S. Oil Fund ETF and The United States Gasoline Fund ETF

April 6th, 2010

Zacks highlights commentary from People and Picks Trader inthemoneystocks.  For more Voice of the People, visit http://at.zacks.com/?id=5851

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When Will Bad News Become a Negative?


The bull rally from the March 2009 lows is now euphoric. It seems that the kitchen sink can be thrown at the market and it will still rise. A little over a year ago, if someone sneezed the market would decline, and drop sharply. Today, it goes up on a daily basis, as the market has been down only a handful of trading days since February 5th, 2010. The SPDR Dow Jones Industrial Average ETF (NYSE: DIA) has risen nearly 12 percent in just five short weeks along with the rest of the major indexes.

While the Obama economic team and the Federal Reserve Bank are out declaring victory, there are many negatives that are occurring at this time. The first negative that everyone should watch for is the high energy prices that the U.S. consumer will have to pay. The U.S. Oil Fund ETF (NYSE: USO) is trading at its new 52-week high, climbing above its long sideways base that it has been in since June 2009.

When crude climbs, usually gasoline follows. The United States Gasoline Fund ETF (NYSE: UGA) is trading at a new 52-week high as well today. This means there will be higher gasoline prices at the pump for all those who are looking to drive and need to commute. This is a major negative for the markets.

The next important negative news for the stock market will be the 10-year T-Note yields trading at or above 4.00 percent. When yields have hit or reached this level it has been a negative for the stock market. This has been when the market actually had a correction. Granted, there have only been two corrections in the stock market since the rally began in March 2009. Both corrections have been about an 8 percent decline in price and lasted around 4 weeks in time.

High yields will affect the mortgage markets and make it tougher for individuals to refinance or even get a mortgage for a new home buyer. The high yields will also become a negative for the United States Treasury as they will have to pay higher interest on their current debt. The U.S. Debt is around $12.5 trillion and growing every day. This is a lot of money in interest that must be paid back to bond holders.

Currently, at of the time of this writing, the market is climbing the wall of worry. Spending programs and entitlement programs are increasing by the minute; however, the market does not care. The Federal Reserve Banks has kept the Fed funds rates at zero percent for well over a year now and the market seems to love it. When the euphoria runs its course, that will be when the market will pay the piper. Until then its up, up, and away.

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