Weekly Results:
S&P 500 1,026.13 [+2.20%] , DJIA 9,505.96 [+1.98%] , NASDAQ 2,020.90 [+1.78%], Russell 2000 581.51 [+3.12%]
and MSCI Emerging Markets 36.11 [+.22%]
When in doubt, predict that the present trend will continue. Merkin's Maxim
A simpler view:
Taking a step back, one can view a long-term chart of the S&P 500. Quickly, an observer realizes that below 800 participants were too negative. On the other hand, revisiting cycle peak of S&P at 1500 seems too ambitious. Meanwhile, the same pattern reminds us that 1200 is feasible. Keeping that in mind, it might be sensible to narrow big expectations. Now, adjusting to non-extreme markets requires fresh acceptance of new trends. Participants are trying to define ‘normal’ after periods of extremes of euphoric tops and crisis sell-off. Today, investors scramble to understand various messages from Federal Reserve, impact of housing data and company valuations. However, momentum is just momentum and hard to fight until a major shift in sentiment. That said, with the S&P 500 around 1000, latecomers feel compelled to add and participate in this rally.
Reality is merely an illusion, albeit a very persistent one. Albert Einstein (1879 - 1955)
Feels like Summer 2007?
A week ago, Chinese stocks tumbled and served as a quick reminder that markets are a bit extended. In fact, the Shanghai Index is down nearly 20% in the past two weeks. However, price performance alone fails to showcase a decline in risk appetite. For example, the S&P 500 is trading at annual highs. Of course, each upside move is supported by policymakers and optimists . In general, it has been costly to bet against these markets and too early to take profits. Some wonder if markets are fed up with bad news. Or simply, observers overdosed on negative news fueled by crisis discussions in 2008. It was only two years ago, where key asset classes appreciated in price. Interestingly, in the summer of 2007 real estate, stock market and commodities rose to new highs only to collapse rapidly in the fall. Awkwardly enough, global assets present similar feel of reaching an inflection point. Once again, a strong correlation exists between equities and Crude.
IDEAS:
Long:
ADM (Archer Daniels Midland), EMS (Emergent BioSolutions), CWT (California Water) MATK (Martek Biosciences) and RFMD (RF Micro), CREE (Cree Inc), LLTC (Linear Technology) and ONXX (Onxx Pharmaceutical).
Profit taking/ Short:
PTR (PetroChina), GG (Gold Corp), SCHN (Schnitzer Steel) and X (US Steel)
Article Quotes:
“S&P said 201 borrowers with $453.1 billion in debt have defaulted this year, exceeding the 126 defaults for all of 2008, which comprised debt worth $433 billion.” (Financial Times – August 19, 2009).
“And while imagining a return to 2007 S&P 500 returns is pleasant, Hussman points out that investors should remember that those highs were based on profit margins about 50% above historical norms, combined with an elevated P/E multiple of about 19 against those earnings”. (Moneynews.com- August 17, 2009)
Levels:
S&P 500 [1026.13] Making new annual highs and stabilizing around 1000 range. Friday marked intra-day highs as investors look to sort out option expiration volume vs. bullish buying.
Crude [$73.89] Marking yearly highs similar to equity markets. The 200 day moving average stand at $68 which suggests a key near-term support. Poised for minor pullbacks but uptrend is in full gear.
Gold [$952.50] Lacking strong evidence of a recovery. Struggling to reach above $960. This displays lack of major buying demand despite ongoing US Dollar weakness.
DXY– US Dollar Index [78.04] Holding above August 7th lows and deeply oversold. Anticipation grows for a trend reversal but anxiously seeking a catalyst.
US 10 Year Treasury Yields [3.57%] Normalizing at current levels, especially between 3.40-3.80%. A break above or below these ranges can send an alarm or hint of emerging trends.
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 Publish Post, considered liable for the future investment performance of any securities or strategies discussed.
No comments:
Post a Comment