What's Causing The Bulls To Smile?

April stats, following on the gains in March, are bound to make bulls smile:

S&P 500 up 10.5% (best since Dec. 1991)

Dow Transports up 18.5% (best since Oct. 1974)

Russell 2000 up 17% (best ever?)

The NASDAQ is positive for the year, the Russell is now flat, and the S&P 500 is only down 2 percent in 2009.

After moving sideways for two weeks, the rally has been given a push in the last couple days because...well, because the market didn't drop and traders who have been short going into earnings season are dramatically underperforming and are being forced to cover.

One analyst, Michael Woolfolk at Bank of New York, summed it up best: "technicals are trumping sentiment and sentiment is trumping fundamentals."

This is not entirely true-for example, earnings have been coming in better than many expected.

This is not because sales suddenly improved; it's because some have become very efficient at cost-cutting (Dow Chemical, Starwood), and others (Proctor & Gamble, Colgate, Owens-Illinois) have been able to get through modest price increases.

Now it’s going to be a show me story—show me the growth, show me the fundamentals are improving.



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