May 4, 2010 – My Square Root Scenario is Happening

 

Featured Trades: (Q1 GDP)


1) My Square Root Scenario is Happening. The ‘square root’ scenario that I have been forecasting for the US economy is coming to pass. On Friday, the Commerce Department’s Bureau of Economic Analysis confirmed that the US grew at a 3.2% annualized rate in Q1, compared to a 2009 Q3 figure of 2.2%,  and 2009 Q4 growth of 5.6%. What’s more, the recovery remains very lopsided, with only export oriented businesses booming and large swaths of the domestic economy, like construction and real estate, still struggling. Keep in mind that the S & P 500 over 1,200 is discounting growth continuing its torrid 3% or more growth rate for the rest of the year. It’s all going to make this coming Friday’s nonfarm payroll more interesting than usual. The whisper number is now calling for job growth of 200,000. A beat will deliver another leg up in the stock market, possibly to 1,250. A shortfall could trigger our annual summer correction. Whatever the outcome, Obama’s political future may depend on it.

squareroot-4.jpg picture by madhedge