We started the year with a worldwide collapse in commodity prices, primarily due to a suspected collapse of China.  Since then, there has been a dramatic rise in commodity prices, including oil, steel, and agricultural products.  China may indeed collapse some day due to their strange set of debt problems, as some argue, but it is not today! In fact, it’s property market is showing signs of stabilization.

As a result, stock markets in commodity-producing nations (MSCI Emerging Markets index) are up 25% and still look attractive, with a 3% yield and a price-earnings ratio of only 14.  The new survey of Wells Fargo’s International Business Indicator shows improved sentiment, with 64% of CEOs expecting improved international trade for their companies.

The pundits remind us that “corporate profits are the mother’s milk of stock prices,” which is a good reminder of what’s really important.  But, 78.3% of the companies reporting for the first quarter show earning that are better than expected.

Even the internal dynamics of the market are looking positive, with all ten sectors of the S&P 500 trading above its 200-day-moving average.  This has happened four times since 1993, with an average gain over 16% over the following twelve months.  Small cap stocks are also looking stronger.

Of course, will all this be enough to avoid the “summer-swoon” we ordinarily see, beginning in May? Who knows?  But, I do suspect it will strengthen the normally weakest season of the year on Wall Street and put the market in a better position whenever the bulls do return.

Regardless, I’m sleeping well . . .