Retail sales lift Wall Street and hopes for economy

U.S. stocks gained on Thursday after surprisingly strong March retail sales increased optimism that the economic recovery is on track.

The same headline rhetoric was used during the jobless recovery of 2004-2007.

S&P Retail Sector Index:


What's really driving retail sales and stocks? Granted, there's always some new marginal demand. This demand, however, is overshadowed by effects of devaluation. The retail trend (economic picture) undergoes a dramatic change once the effects of devaluation are removed. The real trend is nowhere near as impressive as the nominal. This is why the headline spin ignores it.

A heavy, anvil-like overhead gap will provide stiff resistance to the advance. Eventually, the current liquidity injection phase will give way to yet another hemorrhage that will, in turn, require more liquidity.

S&P Retail Sector Index to Gold Ratio:


Source: finance.yahoo.com