En Garde

You can almost picture the bloodshet between the bulls and bears right now.  It’s really heating up.  The battle continues.  One for the bulls today.

I was on the floor of the Chicago Mercantile Exchange today and heard a  lot of chatter about the markets.  One commentator, who shall remain nameless, was telling me it’s a big conspiracy because 401-k money goes in on the 31st and the market goes up and then on the 1st the markets go down.  Is this guy crazy?  Is that really the way the markets work?  Traders are watching 401-k contributions?  Please.  Give me a break.  He said “See, we were up yesterday and now we’re down 120 points today.”  He told me this just as the stock market opened this morning.  I wonder what he’s saying now that the market finished up 150 points?

When the S&P 500 broke through the 50-day moving average on Monday, it looked like we were going into free fall mode.  But, if you look closely, you’ll see we actually closed above the 50-day moving average that day and didn’t finish on the lows.  Looking back, that was very important.  We came back with a mediocre day yesterday and a very strong day today.  So, now we’re firmly above the 50-day moving average.  This is something traders are no doubt watching very closely.  Something else that I’m watching is the relative strength index.  Curing this 2-day pullback, the relative strength index never went below 50.  The last time we went below 50, it was early February and we began a huge decline.  We went back above it around the 9th or 10th of March and we’ve been off to the races since.  I think the S&P 500 can make it up to 900 during this rally and the Dow can make it up to 9000.  It won’t be straight up but I think we can get there.  But, don’t forget, we have earnings season upon us.  The market shrugged off bad news this morning (bad jobs report).  Is it strong enough to shake off what will be horrible earnings?  We don’t know that just yet.

The laggards today were utilities and healthcare.  The leaders were the global growth stocks and emerging markets once again.  Investors are taking some risk right now which is healthy.  The complete opposite of the winter when everyone was running for the hills (which was the right move).  I’m taking some risk for alpha reasons.  I want some extra juice while the getting’s good.  I would love to say these are all long-term investments.  But, the fact is they just can’t be right now.  We need some concrete evidence global growth is back.  It’s all just speculation right now.  One glimmer of hope is that some of our leading economic indicators are moving in a positive direction and have been for some time.  That’s not to say the data we are getting regarding the economy is good but the decline is losing some steam.  The rate of change is what investors are keying on right now and that’s improving.

This post published at www.karleggerss.com

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April 2009
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