Friday, June 05, 2009

No Confirmation of the reversal in market trend

Yesterday's results showed no confirmation of a reversal in the trend up for the markets. The reversal must be confirmed by a leg down, which did not happen yesterday. I wait to see what happens today as everyone else does as well.

The Volume on the Nasdaq was higher yesterday than on Wednesday. The volume on the Dow was less than Wednesday's volume. The Put to Call ratio ended yesterday at 0.87, which was lower that Wednesday's. This also did not confirm a reversal of the uptrend for all Indexes.

In summary, nothing has changed yet and the market is poised to rise again. Today the Unemployment rate came in at 9.4%. This is up from 8.9% for April. This is the highest rate since August 1983. May Non Farm payrolls down 345,000. We will see how the market reacts today to this higher than expected Unemployment rate. This is a huge increase in the rate.

Art Cashin on CNBC this morning said he would head for the exits if the Dow went up another 1,000 points as no one believes this rally but the Institutional Investors are holding their noses and buying as we get close to the end of the Quarter and they don't want their portfolios looking like they weren't smart enough to buy. He said they are waiting to see a pullback during the days and aren't seeing it so they are buying in the last 1/2 hour and that is what is going on. The Dow closed yesterday at 8,750. If we remain in the range of previous limits set by the market, the top is 9,300 and then we pull back. That's still a long way from 8,750 and very painful for those like myself holding any Short positions like the ETF Ultra Short, TZA.

One last thing, the Dow has hovered closely to the 200 day Moving average, Yesterday it climbed above it and was the last of the 3 indexes to do so. Will it hold, or will we go below it, is the major question. And consider this fact: The Dow has a P/E ratio (Price to earnings) of 49 currently and that historically is very high. More usually is a number in the 20's to as high as the low 30's. It confirms an overpriced market. Oh and this morning, in pre-market, Gold is down $20/ounce to $962/ounce.

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