Consumer sentiment sends stocks up

The stock market had a great day, posting a 2.63% gain. Futures going into the session were down around 877, which is very close the important support level of 875. This could have led to a big selloff but instead the market moved higher. The main catalyst for the rally was that consumer sentiment came in much higher than expected. Overall, it's a breath of fresh air to hear that consumers are more confident now than in previous surveys. I'm nervous that some of that air may have been contaminated with some nuclear waste, thanks to North Korea. The market rally, economic green shoots and overall improvement in sentiment is going bite people in the ass, WHEN, NOT IF, things turn grim again.

This week is very important because there is over $100 billion in Treasuries being auctioned. Today, $40 billion of 2-yr bills saw a successful auction. Once again this is positive, but a bit irrelevant. Tomorrow and Thursday will be much more telling. Tomorrow $35 billion of 5-yr's are being auctioned and Thursday, $26 billion of 7-yr's. These bonds have a longer maturity and therefore carry more default risk. If these auctions don't go well, things will get ugly quick. The 10-yr note is now trading with a yield around 3.55%. That rate is up nearly 40% since the Fed started its quantitative easing practices on March 17th. I'm going to go out on a limb and say the bond market isn't feeling what the Fed is doing. As I've said before, rates will continue to rise until the government stops spending, plain and simple.

Don't be a sheep and get caught up on the stock market rising. Light volume days like today are very volatile and prices can easily move one way or the other. The bond market trumps the stock market in size and this market should be followed closely. Rates are going up, prices are going down, another deflationary signal. Inflationists have a stronger following, which means I'll take the opposite side and say that deflation will persist much longer than what "most economists" expect. Without going into too much detail, time and price are the ultimate arbiters of our faith, as my friend Toddo would say. Prices are still FAR to high in almost every financial asset and commodity, which means the downward pressure on prices will be around for some time.

Add North Korea to the equation, who is launching nuclear devices for testing, and you have a pretty uneasy global landscape right now. Watch to see how the bond auctions go tomorrow and always follow the dollar, which made its 2009 low on Friday before bouncing back a tiny bit today, due to weakness in Asian currencies caused by North Korea. The storm is brewing folks and you'll want to be prepared for when these waves start crashing down. Good luck tomorrow!

....couldn't help but throw in some comments from the greatest quarterback of this generation.

"What would I do instead of run out in front of 80,000 people and command 52 guys and be around guys I consider brothers and be one of the real gladiators? Why would I ever want to do anything else? It’s so hard to think of anything that would match what I do: Fly to the moon? Jump out of planes? Bungee-jump off cliffs? None of that shit matters to me. I want to play this game I love"

Ahhh almost football season again...thank you Tom Brady.