Weekly Results:
S&P 500 815.94 +6.17%
DJIA 7,776.18 +6.84%
NASDAQ 1,545.20 +6.03%
Russell 2000 429.00 +7.22%
MSCI Emerging Markets 25.66 +7.22%
A Perspective:
A bear market reversal appeared inevitable heading into March given a weak start for 2009. Now, participants await confirmation to claim early victory for bulls following a strong rally in equity markets. Pending days will provide clues for recent trend. Potential catalysts include clarity on intervention programs, regulatory changes and discussions from G-20 meeting. The cycle view suggests that global assets remain in a consolidation phase which began in 2000. In other words, this decade continues to witness end of bubbles in Technology, Credit and Global Markets. In many ways, innovation and growth appear less lively and require rejuvenation.
Near-term Optimism reaching a pause:
Recent strength is reflected in assets related to interest rates and commodities. Participants witnessed above average returns in financials and housing groups in the past few weeks. The quest for higher risk appetite provides speculators confidence after the announcement of $1 trillion spending for toxic assets. Clearly, global equities are seeing a sharp rally. For example, EEM Emerging Market index up 19% since March 9, 2009. Interestingly, the current rally displays a uniform recovery with significant participation of various sectors. For example, the NYSE Advance/Decline Line increased by 19.15% last week. A collective rise is believed to indicate a strength and positive momentum. However, broad indexes appear extended for timely entry points heading into April.
Sentiment & Thought Process
Currently, panic buying might replace fear as a dominate market theme. At the same time, few observers are afraid to miss upside gains which create sharp rallies.Nonetheless, investors need more convincing. In the past 6 months uncertainty persisted heavily especially given mixed signals from policymakers. In recent weeks, the US Dollar appreciation is noticeable and raises a question if risk-aversion is becoming overdone.
“The nonfinancial firms in the Standard & Poor's 500-stock index have a total of $811 billion in cash and marketable securities on their books, calculates Goldman Sachs. That's just shy of a record high in nominal terms and up $43 billion from the depths of the financial crisis last fall. (JASON ZWEIG- Wall St Journal)
Plenty of cash remains on the sidelines and shorter term holding periods describe most of the market behavior.
Macro Levels:
S&P 500 [815.94] Attempting to hold above 800 and 50 day moving average stands at 791.93. At this point profit taking and technical points can create minor pullbacks.
Crude [$52.38] Facing key resistance around $55 range. Established uptrend since mid February and now showing early signs of stalling.
Gold [$924] 3+ month uptrend is facing key resistance levels. In the past six month, Gold appears extended and poised for declines especially at current levels.
DXY- US Dollar [85.11] Major trading range between 84-88. The commodity maintains its yearly upside trend and faces near-term challenges.
US 10 Year Yield [2.76%] Forming a trading range between 2.70-2.80%. Long-term outlook remains unstable following a multi-month peak at 5.32%.
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.
