Pre Market

Good Morning: Overseas markets were mostly up approximately 0.5%. US Futures however, have been slipping slightly all morning especially after the release of Advanced GDP. The GDP report was very good fundamentally. The headline numbers were inline but more importantly, inventory builds showed a drag on overall growth. This bodes well for second half build out in production, which plays directly into our thesis of a continuation of the bull market in the second half.

The lack of build in inventories for the second quarter may represent a level of skittishness by corporate CEO's which also should morph into a higher level of confidence resulting in higher than expected GDP growth in the coming quarters due to inventory catch up. This is the making of future upside surprises! In addition to the notable slack inventory, exports showed strength and durable goods were very strong. This is also a positive development. Pricing pressures within the report were tame which should comfort all of those inflation hawks.

The market due to its extended nature may not react as positive as it should in light of the strong fundamentals of this report. However after a period of consolidation, we believe a delayed reaction to the upside from this report should be forthcoming. Of course we will need to see some follow through on subsequent reports to reaffirm this case. We will be monitoring future economic reports closely.

Key stocks to watch today to gauge the markets ability to hold on or role over would be WFMI and IM both of which had very strong reports last night. We will also be watching Consumer Sentiment and Chicago PMI, both of which may provide knee-jerk reactions in the market, however are not expected to be major market moving events.

Oil has cracked the $60 price point again as we predicted but as of yet is not causing consternation in the equity markets. We expect more eyebrows to be raised as oil challenges the $62 level. Gold also seems strong this morning but we are looking to fade it.

All in all, should be an interesting friday in which the market should most likely continue its stubborn yet slow advance with periodic shallow hiccups.

-Good Trading-

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