Market Outlook

I have highlighted by the green arrow the recent spike in the total put/call ratio. It accompanied the move higher on Friday in the stock market ( this chart shows only Friday's close for the s&p500). When this happens after a correction I interpret it as a sign of more upside to come in the next days. The spike in the ratio somehow confirms this move up.

Indeed the futures are up about 15 points as I write this. I think the markets like the GDP report.

Here are some more positives from the report, in addition to the ones presented here:

• durable goods consumption increased at the same rate as during the previous quarter while the one for non-durables was considerably lower compared to the previous quarter's;
• residential investment contributed positively to the GDP increase. This is the biggest contribution from the beginning of 2007 and only the second positive one in the same period;
• Non residential structures investment made the first positive contribution since the beginning of the recession.

A negative aspect is the continued weakness of the services sector. The consumption of services is adding to the GDP at a sluggish rate and this sector has the biggest share in the US economy.

In conclusion, this was not a weak GDP report. It shows recovery continuing on its normal path, with consumers coming, slowly, out of their dens. It does not show however what the future path of the economy will be. In my opinion the upside is limited because:

and: