Market Review – February 23, 2009

Market Review – February 23, 2009

In these frenzied and delicate times, investors are accustomed to new habits such as a shorter holding period, less capital exposure and rotating to "safer" investments. Some argue that the definition of investor is being restructured as well.  Finally, the measure of risk by investors is equally questionable.

Gold's journey

Gold is receiving plenty of attention given its solid run which began in late October 2008. Now, observers eagerly watch to determine the sustainability of this recent move. Others look at the commodity behavior as a tool for gauging investor sentiment.

A little over a year ago, Gold cooled its craze and peaked at $1011 on March 11, 2008.  Once again, Gold is flirting with those levels, except this time the current landscape has significant changes.  To put things in perspective, since last March's Gold peak the S&P 500 is down over 41%, Crude has fallen by 64.19% and  US 10 Year Yields have declined by 21 % . At the same time, the US Dollar index is up 18% over the same time period. One can argue that Gold prices appear less impacted by systematic worries.  Perhaps, a confirmation of higher demand for less risky assets.  At this point, Gold might be overbought in the near-term, but ultimate judgment of its pricing awaits further testing.

Market Feel:

Last week's actions were mostly dominated by discussions of bank nationalization and breaking of a key technical level (I.e.  S&P 500 at 800).  A yearly review of equity markets reminds us sectors perceived defensive.

"Three sectors did see year-over-year increases in earnings, however. Utilities were up 6.1%, Consumer Staples were up 9.6%, and Health Care was up 9.9%." (Bespoke Investments -February 19, 2009).

Lots of headline reactions are expected to spark market reactions. The shakeout in financials most likely will dominate the overall market behavior. Overcoming psychological and technical hurdles is the next challenge for bulls.  Near-term reactions and speculation on government's decisions should create swings. Outside of this speculative arena, stock specific selection appears more rewarding in Healthcare.

Macro Levels:

S&P 500 [770] : Next support level stands at November 2008 lows of 741.02.  Poised for short-term recovery, although few points below October lows of 2002.

U10 Year Yield [2.78%] Attempting to hold above 2.60% and 2.50%  which is near the 50 day moving average.

Crude [ 38.94] : Continues to hold above $32 while struggling to push above $40 in the past few weeks. The 50 day moving average stands at $40.54 and 20 day moving average of $39.70. In other words, near-term indicators are pricing in $40 as a key resistance level.

DXY – US Dollar [86.48] Since December 18th low, the currency index is up over 12% and continues to demonstrate strength throughout 2009.

 

Dear Readers:

The positions and strategies discussed on MarketTakers are offered for entertainment purposes only and are in no way intended to serve as personal investing advice. Readers should not make any investment decision without first conducting their own thorough due diligence. Readers should assume the editor holds a position in any securities discussed, recommended or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any way, considered liable for the future investment performance of any securities or strategies discussed.