Weekly Results:

S&P 500 866.23 -.39% 
DJIA 8,076.29 -.68% 
NASDAQ 1,694.29 +1.27% 
Russell 2000 478.74 -.13% 
MSCI Emerging Markets 27.83 -.54%

Overall Picture:

Investors strive to decipher polices and regulatory decisions. Even Friday’s document on the health of US financial system is not enough to explain long term solutions. Through this maze, earnings point to an upside quarterly surprise. So far, 67% of companies have reported numbers above analyst expectations. (Bespoke Investment). Maybe, this makes sense following a historic downturn and ongoing economic concerns that led to lower expectations. Challenges in the current landscape go beyond declaring a directional wager. Specifically, long-term investors look to grasp mixed economic data, gauge sentiment among partakers and speculate on pending catalysts. Interestingly, Federal Reserve guidance is a topic of key consequence for equity and currency observes. Clearly, an increasing demand for further clues given side way price patterns of S&P 500 index and Crude. Simply, majority players are reluctant to add at current levels despite recent shift towards risky assets. A pause in this rally now sets the stage that tests buyer conviction.

Picking Spots:

Upcoming earnings ought to shape stock-specific reactions. Perhaps a time to  Identify themes for the next cycle based on lessons from previous turnarounds. For example, isolating between innovative and resource groups might present opportunities. That said, headlines are difficult to ignore even for those contrarians. As a new administration marks the completion of 100 days; the blurry economic climate takes center stage. Yet, when spotting leading groups  housing and interest sensitive themes are prime candidates. A step back, reminds us that Financials offer the highest risk/reward in the marketplace. This week, S&P/CaseShiller Home Price Index along with FOMC comments serves as key catalyst for speculators. 

“And in the housing sector, the declines in sales and construction of single-family homes have abated in the past couple of contrarians months--in part, perhaps, because of the low levels of mortgage interest rates and the greater affordability of housing. As demand firms, and once inventories of houses and a broad range of goods are brought into line with sales, economic activity should begin to stabilize.” (Speech from Federal Reserve Vice Chairman Donald L. Kohn)

Select Technology and Healthcare stocks remain undervalued when examining financial statements.From a cycle view point, a promising outlook for merger activities as Larger companies seek growth. Importantly, nonbelievers of emerging markets and commodities can rotate into Western based innovative companies. In other words, an alternative option. Nonetheless, investors sentiment towards risky assets paints a better overall picture.

MACRO LEVELS:

S&P 500 [866.23] Index keeps hovering in a tight range around 800-900. Since October 2008, directional trend is unclear given a range between the 50 and 200 day moving average. 

Crude [$51.55] Trying to re-accelerate after bottoming earlier this year. Near-term support is around $46.

Gold [$907.50] Developing strength in the last few weeks. Odds appear favorable for a recovery. Next key target is annual highs of $989 reached in February 2009.

DXY – US Dollar [84.71] 2+ month of declining trend which suggests an early decline. Approaching an inflection point as index nears 84. Further economic data can provide clues for an unambiguous reaction.        

                                                                                                                                                                                                                                
US 10 Year Yield [2.99%] Once again, yields are nearing the 3% range. Specifically, 3.04% marked annual highs in February.

 

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 anyway, considered liable for the future investment performance of any securities or strategies discussed.

 

 

Market Outlook | April 20, 2009

Weekly Results :

S&P 500 869.60 +1.52% 
DJIA 8,131.33 +.59% 
NASDAQ 1,673.07 +1.24% 
Russell 2000 479.37 +2.39% 
MSCI Emerging Markets 27.98 +1.63%

A game of expectations:

Another positive week for global markets as fear slowly evaporates.  This rally is mostly driven by earnings and ongoing six week momentum. Recent optimism is fueled by participants expecting results better than analyst estimates. At the same time, those chasing returns are gaining further conviction. Financials reported a pleasing quarterly outcome. In addition, improving technicals and less market turbulence justify the recent upside move. Nonetheless, this inevitable recovery is due for a pause.

Buying Dynamics:

In terms of leading groups, Homebuilders are nearing their 200 day average faster than other groups. Increase in home sales and appreciation in Housing Market Index (HMI) hint of an early turnaround. At the same time, Real Estate state stocks are cheap attracting long term investors Yet it seems too premature to declare that the downtrend is nearing an end.  Therefore, expectations continue to drive price moment than actual fundamentals for weeks ahead.

“Analysts have cut estimates for 772 companies in the S&P 1500 and raised estimates for 290 over the last four weeks. This works out to a net of -482, which represents 32.1% of the Index - the highest level since late September. " (Bespoke –April 2009)

Macro Clues:

The US dollar peaked on March 4^th. Two days later, the S&P 500 bottomed at 666. Now, investors are wondering if the US Dollar declines along with interest rates and commodities. Perhaps, this trend creates a favorable environment for equities. Basically, this showcases an expansion in risk appetite.That said, credit conditions for most companies are deteriorating. At early glance,  investors dismissed cooling economic data from China. One interpretation suggests that most buying is due to speculation. Similarly, mixed economic data can  . In other words, recent trends are not fully defined from a long-term perspective.

“The smart money has not moved back into the market since the financial collapse of 2008. This suggests that the smart money is viewing the current rally that began on March 9 as a bear market rally."  (Chartoftheday.com)

Macro Levels:

S&P 500 [869.60] Approaching a key level around 900 after surpassing 50 day average of 791.

Crude [$50.33] Several months of a sideway pattern where the 200 day average stands at $72.

Gold [$870] Two month decline trigged after Gold reached annual highs in March. Longer term uptrend remains intact with major support at 840.

DXY – US Dollar [85.98] Index continues to maintain its relative strength despite recent pullbacks.

US 10 Year Yield [2.94%]  Yields are struggling to move above 3%. In upcoming days, observers  closely watch to see potential trend reversal.

 

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 anyway, considered liable for the future investment performance of any securities or strategies discussed.

 

 

 

Market Outlook | April 13, 2009

Weekly Results:

S&P 500 856.56 +2.66%

DJIA 8,083.38 +1.32%

NASDAQ 1,652.54 +3.11%

Russell 2000 468.20 +4.0%

MSCI Emerging Markets 27.53 +2.79%

Semi-defined uptrend:

As earnings season approaches, observers seek a balance between optimism and weakening fundamentals. Since the start of the year, reported economic numbers led to upside surprises. Perhaps, the surprise element serves as a key catalyst for upside moves. In upcoming weeks expectations can shape stock and index performance. Similarly declining volatility creates an increase in risk appetite. The VIX (Volatility index) has sharply fallen from turbulent and extreme levels. In addition, some macroeconomic issues remain unsettled. More clarity is required on regulatory changes, pending bailouts and emerging political tension. Combining these factors  partially explains a semi-defined uptrend within a bear market.

Four recent economic data points (ISM data, New Home Sales, Existing Home Sales, and Non Farm Payroll) were all spun by Wall Street as if they were positive; if you dug beneath the headlines to review the actual data, they were all terrible. (Barry Ritholtz - April 12th, 2009)

Innovative Themes:

Leadership in Small Cap and Technology present bullish potential. So far this year, NASDAQ is up 4.8% and Semiconductor index is higher by 20%. Few interpret this as an early indication of a recovery in technology after multi-year underperformance. On the other hand, the Biotech Index (IBB) has yet to participate in the recent recovery.  

Some optimists are not fully convinced on the upside potential of Technology and Healthcare. Sharp sell-offs in the past 6 months contribute to this skeptical view. On a relative basis, commodity linked groups are poised for pullbacks. For example, Gold has reached elevated levels and Crude remains in a cycle downturn. Meanwhile, credit related themes are too risky and speculative. That said, innovation based themes in technology and healthcare appear favorable. At this point, additional clues are needed to examine  sustainability of core fundamentals. Most pundits and investors are eager to make directional and timely bets. Nonetheless, identifying themes and changing dynamics can be more rewarding.

 

Macro Levels:

S&P 500 [856.56] Index holding above 800 which signifies a psychological point. Technical indicators suggest next upside potential is around 1000. Overall uptrend is unclear despite recent market recovery.

Crude [$52.24] Long-term charts point to an established downturn. Recently, buyers showed interest around $40 but now the commodity is overbought. A move close to $60 can provide a better gauge of investor attitude.

Gold [$880.50] Multi-week declines after peaking on February 20^th at 989. Strong support around $840.

DXY – US Dollar [85.78] Intermediate term momentum is positive. Index is on the brink of retesting highs from March 2009.

US 10 Year Yield [2.91%] Tight trading range forming between 2.60-3%. Yields have failed to break above 3% several times in 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 Publish Postway, considered liable for the future investment performance of any securities or strategies discussed.

 

Market Outlook | April 6, 2009

http://markettakers.blogspot.com/                                    

Psychological puzzle:

A Psychological puzzle as  investors' fear appears to evaporate at least temporarily.  Usually, most investor seek dramatic indicators for a turnaround. Nonetheless, price action suggests that key participants are willing to speculate in aggressive areas. In fact, riskier assets have risen sharply especially in retail, technology and commodity based groups. Now, the sensible question calls for one to measure risk/reward opportunity of adding long positions. The current move in US equities presents a uniform upside participation in various stocks which implies favorable odds for a bullish run.  In addition, stock market behavior generally looks ahead of weak economic data. Headline economic numbers reiterated weakness. That said, select economic areas are showing slight improvements such as manufacturing and construction. Most financial headlines focused on G20 meeting, Federal reserve actions,  role of US Dollar and changes in accounting standards. These factors have yet to showcase clarity in overall fundamental picture. Basically, more follow-through is required to reach a defined trend that goes beyond speculative behavior.

Bear market optimism :

Price behavior alone does not tell the full story. At this juncture of a sharp rally, participants attempt to weigh mixed headlines and cycle behaviors.

A quick reminder:

“ There were six bear-market rallies during that stretch, with returns of more than 20%, each one fueling a sense of renewed optimism. Yet each counter-trend rally ultimately fizzled-out and unraveled, before market indexes skidded to new lows.” Richard Russell (Dow Theory Letters).

Pattern reminders:

Recent history reminds us that the previous bull cycle started in March which marked a bottom. In fact, on March 12, 2003 the S&P bottomed at 788. Amazingly, that behavior compares to this year’s lows of 666 reached on March 9th. Perhaps a coincidence or a seasonal matter. Nonetheless, a striking parallel even for the casual observers. Similarly, a long-term chart showcases 800 level as a key technical point for S&P 500. The “800 level” marked the tech bullish run of 1997 and trigged the recent bullish run led by China, Credit and Crude in 2003. 

Message from Emerging Markets:

In these early stages, global equities are pointing to growing optimism. Inflow into emerging markets increased by $1 billion and Asian countries issued debt totaling above $176.3 billion. In other words, select data points confirm increasing confidence.

"Emerging-market governments and companies borrowed more in international bond markets this week than at any time in the past two years” (Bloomberg, Laura Cochrane)

Strength in global equities closely coincided with weakness in US Dollar. Gains in Canadian and Australian Dollar are noticeable. Again, this fits the theme and movement towards risky assets which is reflected in stocks of related to materials. Currency and commodity indicators sever as a barometer for risk appetite. EEM (Emerging Market Fund) demonstrates a bottoming process that began six month ago after holding above $20. IMF decisions severed as an upside catalyst to an index that continues to maintain  relative strength. Interestingly, in the past 6 months the VIX (Volatility Index) has declined by 55% which reiterates the point that investors are overcoming irrational worries. Perhaps, the next major concern can focus on  investor complacency rather than fear.

Macro Levels:

S&P 500 [842.50] Extreme lows in early March triggered an early recovery phase. Holding above 800 (near 50 day moving average of 790) can encourage a bullish bias. 

Crude [$52.51] Bottomed three times around $32-35 range and stabilizing at current levels. Interestingly, heavy resistance at $60.

Gold [ $905] Approaching multi –year highs of $1011 reached in late March 2008. Nearing overbought conditions and few points removed from previous highs of $989 from earlier this year. Investors attentively await further confirmation.

DXY – US Dollar [84.16] Annual trend remains positive. A range-like behavior forming between 82-86 in the past six months. This suggests a near-term pause in US Dollar appreciation.

US 10 Year Yield [2.88%] Demonstrating strength above 2.60%. Solid uptrend forming since  lows of 2.03%. Despite a 14 basis points weekly increase, uptrend in yields is set to pause. This week, the Federal Reserve plan to purchase additional debt.

Long Speculative Ideas:

CREE (Cree Inc): Demonstrating relative strength since August 2008. Poised for an upside run based on strong fundamentals. Price declines can offer buying opportunity between $24-26 range.

NLY (Annaly Capital Management) :  Despite recent dividend cut the company offers promising entry point given changes in financials. Core earnings remain solid given investment in government guaranteed securities. A test of major support at $12, presents an entry point especially for longer-term participants.

YGE (Yingli Green Energy): After underperforming broad equity markets, the stock is attempting to bottom. Early stages of recovery with next key technical point at $8.83 (200 day moving average). Presents exposure to emerging markets and growth in alternative energy. Recent improvements in financial access along with support from Chinese government generates promising outlook.

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 Postway, considered liable for the future investment performance of any securities or strategies discussed.

Market Outlook | March 30, 2009

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.

 

Market Outlook| March 9, 2009

http://markettakers.blogspot.com/

Weekly Results:

S&P 500 683.38 -7.03%, DJIA 6,626.94 -6.2%, NASDAQ 1,293.85 -6.10%, Russell 2000 351.05 -9.76% and MSCI Emerging Markets 21.10 -1.31%

Gauging Fear:

Markets continue to test participants patience and remind speculators that downtrends require additional time. Clearly, the current dynamics  provoke further  impatience among value seekers and long-term buyers. Basically, skepticism is too high and serves as a driving force behind short-term holding periods. Therefore, a series of catalyst should determine the timing of a bottom. 

“At this juncture, short-term movements are almost impossible to predict, although the sell-off over the past few days - a capitulation in some respects - could nourish the long-awaited tradeable rally. Also, Lowry's 90% down-days, like we experienced on Monday and Thursday, are often followed by two- to seven-day bounces.” (Richard Russell (Dow Theory Letters).

Financial scoreboards and headlines paint a bearish tone. For example this year,  the Volatility Index (VIX) is up 23% and S&P 500 down 24%. A developing relationship that is  noticeable since summer of 2008.Broad markets have witnessed negative returns In the last 8 out of 9 weeks. This reflects weak economic numbers, bruised confidence and plenty of unknowns ahead . In addition, overall consensus appear to  focus on  worst case scenarios. Similarly, the  AAII Investor sentiment data reached  its lowest level since 1987. Some contrarians view this occurrence as a guide for a trend reversal.  On the other hand, bear markets present sharp rallies but those gains are not sustainable.

Rotation within a downturn:

Emerging markets have outperformed US broad indexes especially since October 2008,.  Last week the S&P 500 declined 7% versus a 1.3% fall in Emerging Market Index.Perhaps, this trend is closely linked with multi-month strength of basic materials.  In other words, commodity based sectors account for a significant portion of  emerging markets. Secondly, the Chinese stock market is up 14% year to date despite a sharp sell-off last year. At the same time, China’s manufacturing sector continues to grow. Finally, rate cuts by developing countries sever as a catalyst for fundamental improvement. That said, US equities continue  to underperform against global indexes, even in a period of risk aversion.  Now, risk levels of US equities seem mysterious as analysts decipher the beaten up fundamentals.  In upcoming weeks, the sustainability of emerging markets can determine if r capital will favor this segment. In other words,  investors look  to sort out new leaders and seek evidence of strength in emerging markets.

Macro Levels:

Crude ($45.52):  Trading at a higher end of a three month range.  Extended in the near-term. Key support of $40 which is closet to 50 day moving average.

Gold ($936): Consolidating between $900-950. A positive trend remains in place. Setting up for a short-term recovery especially with increasing concerns of paper assets.

DXY- US Dollar Index (88.51): Reaching a key junction after making annual highs of 89.62. On a relative basis strength is positive but poised for a near-term pause around 86.

US 10 Year Yields (2.87%) : Few points removed from multi-year highs of 3.04%. Poised for pullbacks around 2.60%.

 

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.

 

Market Update | March 2, 2009

Digesting Information:

As March is upon us, major headlines resurface at a rapid pace. Simply, growing factors contribute to uncertainty. Some view the government 35% stake in Citigroup as a historical event. On the other hand, few argue that deals of this capacity fuel pessimism especially for banks and equity markets. At the same time, Berkshire Hathaway’s annual report reinforced overall challenges for those seeking profitable areas. Similarly, Healthcare stocks are being tested despite relative leadership in 2009. The sector declined on pending budget proposal and forced buyers to reassess long positions. At this stage the attractiveness of paper assets remains questionable and less convincing.

Reaching a compromise:

Clearly, the past 12 months witnessed several all-time economic and financial records. Nonetheless, select indicators point to a turnaround. For example, slight increase in retail sales,rising mortgage applications and recovering corporate bond markets. Perhaps, too early to judge. Mainly, the clash between investor confidence and government policies should dictate market direction. This debate among market participants will play out in the second quarter.  

“Unstable weather may more often occur during spring, when warm air begins on occasions to invade from lower latitudes, while cold air is still pushing on occasions from the Polar Regions.”( Wikipedia)

Macro Drivers:

AAII investor sentiment data shows 24% of investors are bullish and 45.1% bearish. This breakdown is close to sentiment readings from summer 2008.  Similarly, Gold is approaching July 2008 levels as well. Around that period, Gold failed to hold above $950, Crude peaked at $147, S&P tumbled near 1300 and 10 Year Yields peaked near mid 4%. Investors await for additional clues to confirm upcoming inflection points. Recent history reminds us of a high possibility for a synchronized downturn across various sectors.

Recently, the S&P 500 broke below a key psychological point of 800. Eventually, this  bruised confidence and triggered sell technical signals. Additionally, the fundamental erosion fails to create buyer interest. Despite growing concerns, the US Dollar remains strong. On a relative basis the Dollar is accepted as a safer instrument and continues to outperform.

Macro Levels:

Crude ($44.76):  Three month range forming between $34 and $46.  The past 3 rallies have failed to hold above $50. Additional catalyst are needed to make a surge from this declining trend.

Gold ($952): In July 2008, prices peaked at $986 which marked the beginning of a sharp decline. The commodity remains overbought in the near-term with the 50 day moving average at $890.

DXY- US Dollar Index (88.08) Strengthening Dollar is a dominate and established theme. In the past year, index is up nearly 25%. The index is outperforming Gold since March 21, 2008 and approaching 3 year highs.

US 10 Year Yields (3.02%) : Recovery uptrend intact from December lows. Yields appear to stabilize between 2.80%- 3%.

 

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.

 

 

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.

 

Market Review | 2/17/2009

S&P 500 826.84 -4.81% 
DJIA 7,850.41 -5.20% 
NASDAQ 1,534.36 -3.60% 
Russell 2000 448.36 -4.75% 
MSCI Emerging Markets 23.95 -2.43%

Unattractive Numbers and Mind Games:

More of the same action so far this year.  Ongoing weakness in the economic and market cycle resurfaces, while lacking sustainable reactions. Lots of noise while lacking concrete data points.  Again, a  speculative environment with extra sensitivity toward headline items and shorter holding periods.  This recent market pause can be attributed to a heavy focus on pending policy decisions and uninspiring earning results. In addition, participants remain too skeptical to commit further capital. In terms of trading characteristics, the dominate theme is based around daily swings.  Simply, a reflection of jittery behavior of global assets.

"With so many market participants trading at intraday and swing time frames--and managing their longer-term trades with shorter-term adjustments--by the time the market has moved in one direction for several days, the majority of players are already on board and leaning for further movement. When the market fails to go their way, they have to unwind their positions, adding to the reversal movement" (TraderFeed, Brett Steenbarger. Feburary 2009)

The inevitable cycle peak generated in credit markets is playing itself out. As new daily concerns emerge, the core of this consolidation phase stems from the previous bullish run. At times, it's easy to forget recent history perhaps driven by human psychology. In other words, "downtrends" are painful but are to be expected. As for plans for further intervention, natural flow of markets remind us that turnarounds require additional time. Nonetheless, growing impatience and lack of confidence point toward a sideway to down market response.

Appealing arguments for fundamental based stock buying is not too convincing (at least on a mass level).  The risk of making  a directional bet has not showcased to be profitable. The S&P 500 is approaching its lower end 3 month range, which stands near 800. Perhaps, breaking below this point triggers negative momentum, in turn leading to sell-offs.  One can pinpoint that the psychological impact which set up a scenario of retesting October 2008 lows, more than the quantitative effect. On the other hand, Gold and Silver are showing noticable strength. For example, Silver is up over 62% since October 28^th.  A  profound statement of fear in paper assets as the demand for safety increases.

Clearly, it has been challenging to find trending groups in a highly correlated markets. Nonetheless, Healthcare and Technology appear to be the leading groups for the next upside cycle move.

"On a sector basis, Financials have the weakest breadth with just 16% of stocks above their 50-days.  Health Care, Energy, and Technology are the three sectors that currently have more than 50% of stocks above their 50-days." Bespoke Investment Group (February 13, 2009)

Macro points:

Crude: [$37.50] Since mid December a narrow range forming between $36 and $46. These levels indicate a neutral view that's not indicative of a recovery.

US 10 Year Yield [ 2.88%] Improvement in yields following a sharp rise in the past few weeks. 50 day moving average is above 2.50%, suggesting that a first wave of recovery is underway. Next key level stands around 3%.

Gold [$935.50] A noticeable uptrend that began in October 24^th  which started the outperformance of Gold especially against the dollar. 

DXY- US Dollar Index [86.04] Sideway pattern continues at current levels. Momentum is positive as reflected in key moving averages.

-------
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.

Market Outlook | February 9, 2009

Weekly Update:

S&P 500 868.60 +5.17% 
NASDAQ 1,591.71 +7.81% 
Russell 2000 470.70 +6.13% 
MSCI Emerging Markets 24.55 +7.88%

Much attention will focus on issues and reactions to government's plan. This weekend's discussion on the stimulus package should set the overall market tone.  Last week, a mystifying  result for participants  given weak economic numbers and a positive stock market return. From a long-term view, these series of event fail to provide clear clues. For the most part,  it seems like a speculators market where long-term participants struggle to find substantial data points. In one sense, economic data signaling bad news is becoming  less of a reactionary event. As volatility stabilizes, its visible that few sentiment indicators  such as the Baltic Dry index, and Weekly Mortgage applications, are conveying a message of hope; which reminds us that's its purely an anticipation of a desired outcome. The current financial status, reflects that investor confidence is tilting in the hands of policymakers.  Similarly, fundamentals are taking a back seat from being a main driver of market reactions.

A visual look at the chart of the S&P 500 reminds us of a sideway pattern.  That begs the question, if this directional pause is a temporary or further declines await?  Current cycle junction points to excess of capital that's flowing out of the system.  Simply, a movement away from leverage and more into government spending. For participants, the concept of temporary optimism has been a trend within an existing downtrend. Oddly enough, existing consensus is to go long banks, homebuilders and select consumer themes.  Nonetheless, sole dependence on newsflow presents surprises and potential risk. On the other hand, Gold is demonstrating a noticeable recovery. Perhaps some will argue this implies a defensive posture amoung global participants. Interestingly, plenty of mixed signals in credit and commodity markets but a deadlock in confidence restoration.  

Stock Specific:

WTR (Aqua America): Positive trend since summer 2008. Utilities are poised to benefit from a defensive spending. Recent increase in dividends raise yields to 3.20% can spark interest among buyers.

SXE (Stanley Inc): Company benefits from defense spending and recent quarter showcased further strength. Major support around $30.

Healthcare:

·        HUM (Humana) : Strength developing and showcased in recent recovery from lows of $22.30. From a long term view, earnings are growing at a healthy pace exceeding expectations.

·        EW (Edward Life Science):  Doubled profits last quarter sending a positive signal. Approaching 52 week high of $66 serving as the next key target.

·        VRTX (Vertex Pharma): Poised for pullbacks around $36. Pending declines offer entry points for sustainable upside move.

Biotech: Current atmosphere offers few ideas with favorable cycle, policies and investor demand. Again, relative strength in biotech stands out. An attractive entry point given opportunities for innovation and growth potential.

Macro Points:

S&P 500 [ 868.60] A 3+ month trading range between 800-900.  For those keeping scores, the index is 22.6% removed from its 200 day average.

Crude [$40.17] Heavy resistance at $50 and most buyers appear interested below $40. This recent trend should be tested in weeks ahead.

Gold [$913.00] Defined uptrend from late October lows of $712.50.  On the positive side, last week's action broke above previous highs of $905. Next key upside level stands at $1011.

US 10 Year Yields [2.99%]  Early indication of a trend as yields increased from 2.40%. Potential near-term pullbacks at current levels.

DXY US Dollar [85.35] An 8 + month upside trend, that started in March 2008, is positive especially above 80. Recent month have seen index pause at the 86 range, which signifies a resistance point.

 

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.