Market Outlook | June 8th 2009

Weekly Results:

S&P 500 940.09 +2.28%

DJIA 8,763.13 +3.09%

NASDAQ 1,849.42 +4.23%

Russell 2000 530.l36 +5.74%

MSCI Emerging Markets 33.59 +1.73%

Mid Year Perspective:

Six months after a historic year, gauging key indicators appears like a guessing game. Most asset classes rearrange from severe levels. Therefore, conducting historical analysis alone is not sufficient . In addition, the lack of defined trends and pending policies contribute to a speculative environment. That said, overall sentiment is biased on the positive side. Interestingly, US 10 Year Treasury Yields, Crude and S&P 500 Index are trading near annual highs. However, recent optimism is mostly based on relative comparisons to points reached in October 2008 and March 2009. Yet, performance alone does not reflect recent capital erosion and reshuffling process of the financial sector.

In weeks ahead, a mild pullback is possible as investors examine the risk of staying invested versus profit taking. Of course, the ongoing rally continues to invite and entice sideline observers. For example, emerging markets outperformance presents solid uptrends . Similarly, major indices broke above 200 day moving averages creating a technical buzz. At the same time, bulls are attracted to Tech and resource based themes given relative leadership. Meanwhile, credit related areas are vulnerable and require additional improvement.

"The four-week flood of money into developing-nation stock funds that drove the MSCI Emerging Markets Index to an eight-month high is sending the strongest sell signal since equities peaked in October 2007. Inflows totaled $12 billion... the most since the 22-country benchmark hit its record high 19 months ago..." (Bloomberg – June 2009)

S&P 500 [940.09] Longer term charts suggest a sideway pattern between 800-1000. Major resistance around 1000 which should further test overall buyers conviction.

Crude [$68.44] Few points removed from annual highs of $70.32. Positive multi-month momentum.

Gold [$962] Trading near the higher end of all time trading range between 900 and 1000.

DXY – US Dollar [80.67] Index hit yearly lows at 78.33 on June 2^nd. Nonetheless, nearing an inflection point around 80. Favorable odds for a trend reversal.

US 10 Year Treasury Yield [3.82%] Friday marked a multi-month high in yields of 3.89%. Overbought in the near-term.

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