Saying the Right Things

Ulli Uncategorized 1 Comment

The Fed decided yesterday to leave interest rates unchanged (no surprise), since the economy is so weak and fragile, that inflationary pressures are not a concern at this time.

Along with a hint that consumers may be starting to spend again was all the confirmation investors needed to pull the market out of a 2-day slump.

The S&P; 500 managed to close at its best level since January 28 and is now only down -3.25% year-to-date.

Amazingly, this rally resumed in the face of very negative Gross Domestic Product numbers. The GDP contracted for the first quarter at an annualized 6.1% rate, far worse than the expected 4.9% and marks the first time that GDP has contracted for 3 quarters in a row since 1975.

It did not matter, the markets raced higher with Dow at one point reaching the plus 250 point level before selling set in.

The only fly in the ointment was the fact that the S&P; 500 could not permanently pierce a major resistance level pegged at 875. While it traded above for a while, it could not hold on to those gains. Technicians, who follow support and resistance levels, seem to think that another 100 points on the S&P; to the upside is a distinct possibility once the 875 figure can be successfully penetrated.

Our domestic Trend Tracking Index (TTI) is now within 2.62% of breaking out to the upside, while the international index has to rise another +3.78% before a buy in that arena will be triggered. We continue to hold and add to our hedge positions subject to our sell stop discipline.

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Comments 1

  1. It seems to me, right now, the market has two very unpredictable bull and bear animals. One day the market's worried about swine flu and it goes down, but the next day, traders don't have swine flu and it goes up. Then, bad GDP news is released, but the market goes up anyway. It seems to me, right now, this market is being driven by hope and emotion much more than factual data. I have concern that, one day, the data will catch up with the emotion, and the bears will come out again, without much warning. In the meantime, I believe that April was the biggest monthly bull market since 2001 — very tempting for traders to jump in with both feet. Many analysts have set the S&P; 500 at 875 as the point at which the market definitely is a bull market rather than just a bull market rally in a bear market. Well, yesterday, the S&P; 500 closed slightly above 877. So, I guess the analysts will be putting their clients' portfolios and their own into high gear and jumping into the pond with both feet. That's usually what wakes the bears up from hibernation.

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