The current account balance is a broad measure of foreign trade that includes trade in goods and services, investment flows and foreign aid and is regarded as the best measure of America's international standing.

The trade deficit was down 6.5% to a $208.7 billion gap in the first three months of this year. This comes after a significant narrowing at the end of 2005, when the Commerce Department reported a record trade deficit of $223.1 billion.

While this is encouraging, the deficit is still near its all time high and analysts believe this quarter will prove to be another record, as will this year.  This could explain why the markets didn't react much to Friday's favorable news (that included a second report indicating that consumer sentiment in early June rebounded after its big drop in May), especially in light of continuing high oil and commodity prices.

The market is also still getting to know Bernanke.  Other than Greenspan's "irrational exuberance" comment from which the market still hasn't fully recovered, Greenspan used discretion in his comments.  Bernanke, on the other hand, seems to have a looser mouth which caused one of the most volatile weeks in the market in years.

The yield curve continues to be inverted, indicating that the market expects a rate hike not only in the June's FOMC meeting, but also another quarter-percentage-point at the beginning of August.  An inverted yield curve preceded each of the past four U.S. recessions.

All this begs the question whether the latter part of the past week in the market is sustainable.  Since nothing has changed fundamentally and since this week's volatility definitely showed fears of higher inflation and further tightening, it is possible that the market isn't showing sustainable strength.  Investors might soon be looking at safer instruments such as cash and commodities if inflation keeps ticking higher.  Perhaps a look north of the border at the commodity heavy Toronto Stock Exchange is something worth considering.