Home

S&P

Market Update 03-09-10

The major stock market averages have been climbing back toward their 52-week highs. For the S&P 500, for instance, we’re only about 1 percent below the January highs around the 1050 area. Depending on how the S&P (and Dow Industrials) act in the near term it should set the tone of the market for the next several months.

For instance, we’re coming up on the S&P’s 200-week exponential moving average. If the powerful rally we’ve experienced in the last year is nothing more than bull trap in the context of an on-going secular bear market, and there’s still a strong argument to be made that it is, then that level is a logical place for the market to stall again.

Failure to close above the 1050 market for several days running will likely shake investors’ confidence and lead to at least a modest pullback in share prices, probably resulting in another retreat back to around 1050.

If, on the other hand, the S&P does hold above 1050 for several days, the technical breakout will bring in more buyers who are likely to drive share prices even higher. Looking at the index’s long-term chart, the next leg up would probably carry us to around 1220, last seen back in September 2008. That area represents formidable overhead resistance that stretches all the way back to 1999.Read more...

Market Update 02-02-10

 Stocks are rallying this week after several weeks of selling. But we wouldn’t be in any hurry to pronounce the correction over. Our work suggests that equities are likely to remain under pressure in the weeks ahead. Read more...

Market Update 12-15-09

The rally in the U.S. dollar is back in force today, with the Dollar Index climbing to its highest level since early October. Given how far it has fallen since March, a rally up to its 50-day average—about 2 percent from here—is certainly a possibility. At first blush that doesn’t seem like all that much, but for currencies, such a move in a relatively short span of time is a big deal.
 
The inverse correlation between the dollar and stocks has been extremely high during the past year, so a rising dollar is frequently seen as bad news for equities as it sends the so-called carry trade to the sidelines. Regardless of the dollar’s moves in the coming weeks, the market is likely to trade in a relatively tight range. Technicians see the 1120 area on the S&P as stiff resistance where stocks will likely stall. Likewise, absent some external shock, downside risk in the near term is also likely to be rather muted. Looking on a somewhat longer time horizon, however, there’s ample reason for concern.
 
This morning we had a much worse-than-expected reading on producer prices, signaling that inflation could be back on the table sooner than most would like to admit. At the same time, we also had a surprisingly weak reading on the New York Empire Manufacturing Index of general business conditions.
Read more...

Market Update 11-02-09

Short-Term Key: Negative Long-Term Key: -30 (Neutral)
 
This morning in our office, someone jokingly quipped that with gold over $1,000 an ounce we might have to stop using gold bars as doorstops. I said, “Don't worry, they're insured.”
 
Of course, we don’t actually have gold doorstops, but if we did, the only thing to worry about would be theft. Gold has the unique advantage of being virtually immune to the physical risks that plague other assets.
 
For instance, unlike other commodities, gold will not degrade over time. Its beauty endures in a way that makes ageing film stars and fashion models green with envy. It does not oxidize and corrode like other metals do, nor is it fragile in any way.
 
True, gold's chemical properties can be replicated somewhat using silver or platinum, but neither of these comes as close to gold in attaining the Platonic ideal of timeless beauty.
 
Moreover, the gold supply has remained fairly constant throughout history.
Read more...

Market Update 10-27-09

During the past week the stock market has shown numerous signs that the seven-month rally, which has carried shares to not only deeply overbought territory but to their highest valuations in years as well, is getting tired.
 
Heading into trading this week, the S&P 500 was 20 percent above its 200-day moving average. This is a rather rare occurrence. For instance, even at the height of the tech bubble in 2000 we didn’t reach such an overextended point. In fact, during the Post War period the only occasions we moved up so far, so fast was briefly in 1975, 1982 and again in 1983.
 
Stocks promptly fell sharply after reaching that lofty level in 1975, by 1982 and 1983 shares traded sideways for a time, consolidating their gains. But what was striking about these past occurrences was that valuations were so much lower than they are today, with trailing P/Es in the in 10 to 13 region, as compared to an off the scale reading of more than 140 for the S&P today!
 
Even using the S&P Industrials as a benchmark (thereby excluding the troubled financials) the P/E right now is 32.5. Likewise, even using the most optimistic estimate of forward earnings stocks are quite dear.
Read more...

Weekly Update 09-28-09

Short-Term Key: Negative Long-Term Key: +2 (Neutral) 

A couple of economic statistics released last week suggest the economy may be growing more slowly than expected/hoped/prayed. These included a slowdown in housing and weaker durable goods orders (now that the cash for clunkers program has ended).Read more...

Market Update 06-23-09

It’s increasingly looking like the correction we’ve been looking for is underway. Stocks took out several important support levels with the decline yesterday, paving the way for further declines. Moreover, trading volume has been quite light, suggesting that share prices are by no means washed out just yet.
 
With stocks valuations hard to assess these days, at least in terms of forward earnings and cash flows, due to the recession, traders are paying much greater attention to technical analysis. If the market holds above yesterday’s lows during the next couple of days then a rebound back toward the recent highs is likely. If, on the other hand, we take out those lows, more selling will await us.
 
The 870-880 area on the S&P 500 is a level we’re watching with keen interest. In the new bull market v. bear market rally debate this level should play a pivotal role. There’s also some support in that area dating back to last fall. It’s also a logical stopping point for a healthy correction of 6 to 7 percent, something you want to see if the rally is to be sustainable.
 
A break below that 870-880 area is likely to prompt a wave of selling that takes stocks down to 780 or so on the S&P, with the March lows as the next important support level below that point.
Read more...

Market Update 06-04-09

Stocks Surge as GM Goes Bankrupt

 

The long outdated notion that what's good for General Motors is good for America was finally put to rest this week. What we've had instead is yet another case of the stock market ignoring bad news by rallying when many expected it to decline.

 

On Monday, GM entered its long-awaited bankruptcy. The Standard & Poor's 500 jumped 2.6 percent to its highest level of 2009. And the Dow Jones industrials jumped 221 points, perhaps partly in celebration of the fact that GM shares will no longer hold the Dow back. Citigroup shares won't either. GM and Citi are to be replaced by Travelers and Cisco Systems effective Monday.

 

All told, the S&P at Monday's close had soared 39 percent from its March 9 closing low. Yesterday, the market was hit with heavy profit taking, particularly in commodities-related issues. Then the market rebounded today.

 

The rally has been fueled most recently by some evidence of possible growth in manufacturing around the world, reflected particularly in surging commodity prices.Read more...

Market Update 06-02-09

On several occasions in recent months we’ve made reference to the fact that during this rally (a rally of historic proportions) stocks have remained highly correlated. By that we mean they’ve been moving together in a very uniformed manner, regardless of their individual prospects.
 
It has become commonplace, for instance, to see a company report lousy earnings and offer a bleak outlook and nevertheless still see its share price rise by several percentage points. For some inexplicable reason, for instance, shares of General Motors traded higher yesterday, even though the stock was set to cease trading at the end of the day. This kind of action tells us that systemic factors are driving stock returns rather than news that will impact companies’ earnings prospects. The last time stocks were so highly correlated was in October, 1987.
 
To justify recent returns you have to an unwavering faith that our banking sector is functioning as it should—and it’s not; that the downturn in the housing sector has or will soon end—but it hasn’t/won’t; and that the consumer is going to shrug off rising unemployment, rising gasoline and food prices, rising foreclosures and rising interest rates and return to his/her spendthrift ways—but he/she won’t.
 
In short, stocks are priced to perfection here.
Read more...

Market Update 06-01-09

May 7th of this year was the 50th anniversary of a seminal Rede Lecture given by the scientist and novelist C.P. Snow at Cambridge University. (In fact, The Times Literary Supplement described the expanded version of this lecture as one of the 100 most influential books since WWII.).
 
Snow claimed that the Western World had become divided into two distinct cultures: one of humanities and one of science. His concern was that communication between the two was breaking down. For instance, if you ask a science major if he has ever read one of Shakespeare's plays, he'll probably say “yes,” but if you ask an arts major if he knows about the 2nd Law of Thermodynamics, he might look at you blankly. Snow therefore felt the humanities had fallen behind the times. He urged the two cultures to become more united, because the lack of communication between them was a barrier to solving the world's problem
Read more...

Free
Dr. Stephen Leeb's
Market Forecast Newsletter

Email address:
(optional) Your name:

Latest Video

Navigation

Poll

Where do you think the U.S. Dollar Index is headed in the next six months?:

Most Viewed

Long Term Growth

more

Aggressive Moves

more

Inflation Survival

more

Income Performance

more

ETF Movement

more