Weekly Results:
S&P 500 1,068.30 +2.45% , DJIA 9,820.20 +2.24%, NASDAQ 2,132.86 +2.50%, Russell 2000 617.88 +4.09% and MSCI Emerging Markets 38.86 +2.66%
Assessing the calendar year
It feels that the market offers two fat pitches per calendar year. In other words, investors are presented with two fruitful entry points to take advantages of opportunities. Of course, 2008 offered several chances to bet against or avoid equity markets. However, last year was an outlier and typically the case at the end of bullish cycles. Otherwise, in the past few years the opportunity is on the long side. So the question for this year is: Have two major swings taken place already? Also: Is there another buying opportunity ahead of us? Clearly, the first reward for buyers came in this March. Others wonder if August delivered the second buy point or another fruitful chance is ahead of us at the end of the third quarter.
Heading into Friday morning, the S&P 500 was nearly 20% above its 200 day average. Simple math based on historical studies suggests a much needed breather. Recently, Gold and Stocks are slowly moving higher which reminds us of 2007. So far this year Gold is up 14% and S&P rose 18% catching the attention of performance chasers. Declining dollar and rising commodities are part of an ongoing decade cycle.
Finding Rhythm
The midsummer correction proved that pullbacks are shallow. Even aggressive short sellers in 2007-08 acknowledge that odds for downside bets are less attractive. In fact, these days’ attempting to catch declines is riskier and requires extreme accuracy in timing, a difficult game to play even for those watching tick by tick. So this leaves us with growing optimism by analysts, most policymakers and recent market participants. In addition, issuance of corporate and junk bonds witnessed a weekly inflow suggesting healthy investor demand.
Stock Specific Ideas:
PPDI (Pharmaceutical Product): Early signs of a recovery for a company focused on Research & Development in Healthcare. Global expansion in biopharmaceutical areas and recent growth through acquisitions spur potential growth. Finally, upcoming spending in healthcare and innovation may attract buyers.IACI (IAC/InterActiveCorp): Poised to gain as a derivate play on Google. Increase in advertisement spending bodes well for IACI. At these levels, the stock is relatively cheap and favorable for long-term investors.
SNI (Scripps Networks): On pending pullbacks, investors can purchase shares closer to $32-34. M&A speculation and cycle recovery in media present positive momentum.
Previous long ideas: PWR (Quanta Services), SNPS (Synopsys) and ADM (Archer-Daniels Midland)
Article Quotes:
· Private investors in China, the world's largest metals user, have stockpiled 'substantial' quantities of copper as the government ramps up stimulus spending to spur the economy, according to Sucden Financial Ltd. Pig farmers and other speculators may have amassed more than 50,000 metric tons (Bloomberg, September 17, 2009)
· State & Local debt growth accelerated to 8.3% annualized, up from Q1's 4.9% and Q2 2008's 0.9%. State & Local governments expanded borrowings $187bn SAAR - a resurgence back to the peak borrowing level from 2007 ($186bn). Federal borrowings expanded at a blistering 28.2% pace, up from Q1's 22.6% and compared to Q2 2008's 5.9%. (Doug Noland, September 17, 2009)
Levels:
S&P 500 [1068.20] Yet another new annual highs reached last Thursday at 1074.44.
Crude [$72.04] Continues to trade in a narrow range between $66-74. Trendless action continues with 50 day moving average at $68.
Gold [$1012.00] Climbed and surpassed previous highs reached in March 2008. A continuation of a multi-year upside move. Seasonally, a favorable time to continue this upside run.
DXY– US Dollar Index [76.42] Made new annual lows this week. Barely holding above the lowest point reached on September 17th. Since March, the Dollar index is down around 15% since peaking in early March.
US 10 Year Treasury Yields [3.46%] 4+ month of sideway behavior with rates trading in a tight band. A step back reminds us that rates have significantly recovered from 2.03% in December 2008.
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.
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