Market Outlook for week of May 4th

I keep saying I need a clear signal to tell market direction and the question on your mind is, Did I find any? Before I answer that here's a summary of how I look at the past week and where we find ourselves, going into the week of May 4th.

The Dow closed the week at 8,212 and this was a gain of 136 points, or 1.7% for the week. The Nasdaq closed the week at 1719 and that was a gain of 25 points, or 1.5% for the week. Those aren't big gains for the week by any measure. It felt like we were up a lot more given each day the indexes seemed to be up. Again, it feels like a smoke screen to me. The big question is how was the corresponding Volume of trading for the week. It was down again this week. So for the past 3 weeks Volume has declined steadily each week in the Dow stocks and the NYSE. However, the Tech sector Nasdaq maintained a bright spot with steady volume these past weeks with the index rising. This is the bright spot in the market to me and points to the Tech's going to lead us out of the recent big market decline from the Fall.

I have put several 6 month charts ahead of this post, worth clicking on. The first chart is of just the Dow to show the decline in Volume the past week. The second is a comparison of the Nasdaq Composite Index as compared to the Dow and the third is a comparison of the Nasdaq Composite Index as compared to the SP500. The gains of Technology seem to indicate this might be where to have been invested.

The signal I am looking for is Volume. If Volume spikes up, it won't matter what direction as direction will be clearer. Right now it is a rally lacking conviction. Now this can be a good thing as well. Many are skeptical, including yours truly, that the gains are real and many believe that we are not in a Bull Market Rally, but instead are in a Bear Market Rally. If the market can stay the course, as it has since the lows, it will eventually convert the Bears to cover their shorts and we will be on our way to a real Bull Market. But we are clearly not there yet.

The Put to Call ratio closed at 0.82, not low enough to give a sell signal but not high enough for a convincing Buy signal. To me the Put to Call would need to get over 1.05-1.20 to convince me to Buy. And it would have to get as low as 0.55-0.60 to Sell, or buy more Shorts. Some news will spark both this move and the Volume spike, but we still wait for clarity.

The news of this coming week regarding the Unemployment Rate for April has already been discounted. It will show a higher rate but a slowing of the decline over previous months. It is my opinion it will be reported at 9% or higher, getting ever closer to the 10% double digit rate most pessimistic scenarios had surmised. I do not expect this to tank the markets and do expect them to take the number in stride. More questionable will be the market's reaction to the Stress Test results expected to be released on May 7th, the day before the release of the Unemployment numbers.

If you look at the drop in Volume of the Dow index, and look at the Volume of Citigroup dropping this week, you can see a correlation. many banks had weaker Volume this week over the previous week. This can easily be seen by looking at a 6 month Chart of the volume of the Financial ETF, FAS. When they announced earlier this week that there are rebuttals by the Banks to the Treasury's Stress Test data, it quieted trading for both FAS and the short FAZ.

Add to the mix, Warren Buffet's latest comments on Real Estate and it provides an interesting back drop for the coming week. Here's what Buffet said, "There’s no signs of any real bounce at all in anything to do with housing, retailing, all that sort of thing,” said Buffett, 78, in a Bloomberg Television interview before the Omaha, Nebraska-based company’s annual shareholder meeting today. “You never know for sure, even if there’s a leveling off, which way the next move will be.”

So I leave you hopefully convinced that the market direction is still not clear, even while the Dow and S&P goes a bit higher. The only real good news is that Technology seems to be the bright spot and this is substantiated with good solid Volume. So if you believe this rally is for real, make sure you own some good tech companies in your portfolio or at least some dogs that show some life. But remember my overall advice, no matter what, preserve capital!

Bloomberg Survey

================================================================
Release Period Prior Median
Indicator Date Value Forecast
================================================================
Construct Spending MOM% 5/4 March -0.9% -1.6%
Pending Homes MOM% 5/4 March 2.1% 0.0%
ISM NonManu Index 5/5 April 40.8 42.0
Initial Claims ,000’s 5/7 2-May 631 635
Cont. Claims ,000’s 5/7 25-Apr 6271 6350
Productivity QOQ% 5/7 4Q -0.4% 0.8%
Labor Costs QOQ% 5/7 4Q P 5.7% 2.8%
Cons. Credit $ Blns 5/7 March -7.5 -4.5
Nonfarm Payrolls ,000’s 5/8 April -663 -600
Unemploy Rate % 5/8 April 8.5% 8.9%
Manu Payrolls ,000’s 5/8 April -161 -157
Hourly Earnings MOM% 5/8 April 0.2% 0.2%
Hourly Earnings YOY% 5/8 April 3.4% 3.3%
Avg Weekly Hours 5/8 April 33.2 33.2
Whlsale Inv. MOM% 5/8 March -1.5% -1.0%
================================================================

Citigroup shares sold this morning.

I sold my Citigroup stock, symbol C, this morning as there were comments by Tim Geithner over the weekend saying if any large banks needed significant funds they would insist on restructuring changes, as they did with GM. I decided now was the time to leave Citi's stock. I had purchased shares at $1.70 and another group at $2.41, so this was definitely a profitable trade.

I still own a Bank Index ETF, symbol FSA. I had already sold Ford shares and Apple shares so now I have both SSO and TNA shares and a few others I own as long term holds. I do now have cash to buy on dips.

Market outlook for week of March 30th, 2009

This past week both the Dow and S&P 500 climbed over and stayed above the 50 day Moving average. It was the first time in over a year when we had positive gains for 2 consecutive weeks. It sure felt good after weathering the drops of the past year. The chart above shows the Put to Call ratio since January of 2008 to close of the market yesterday. You can readily see we are moving to a lower range on this index. (If you click on the chart it will get larger.) We have not been over 1.00 on this ratio recently, March 5th to be exact. Yesterday's close was 0.92, replicating Thursday's close. The VIX Index closed at $41.04 and while I don't have a chart on this for your viewing, this Index has also come off its highs as well. This Index was as high as the $70's and $80's back last fall and we are now near the lows since early January of $38-$39.

So what's ahead for the week of March 30th? I am overall still optimistic on the market. Many see this as a Bear Market rally and can't see the Dow and S&P 500 going much higher. While I agree that this is still a Bear Market rally, I do believe we can go as high as 9,000 on the Dow before we pull way back again. This means a Buy and Hold strategy is not your best strategy. Trading is the only way to take advantage of the big market swings, which are inevitable. Hopefully when we look back after next week's close we will be above 8,000 and less than 8,500. The quarter ends on March 31st and we will shortly be reviewing earnings reports for a clue on how business is really doing. Stay tuned!

Let's take a look at several trades recently to summarize most of my trades. Starting with the loss, I sold TZA the ETF Ultra Short for a 17% loss. This was painful but remember I had TNA to offset some of this loss, but a loss is a loss. I sold Ford for a 45% profit. I sold Apple for a 16% gain. Apple gained far more since I sold it at $97/share and is now at $106.85/share. I sold some TNA shares for a 17% profit. I am still holding on to many more shares of TNA, some of which are under water. I still have my shares of Citigroup, which I purchased at $1.70/share and additionally at $2.41/share. Current price of Citi is $2.62/share.

I am hopeful this coming week of staying above the 50 day Moving average, but as I have cautioned before, if you are trading, pay attention as this market can go in either direction very quickly. One indicator next week will be the Unemployment rate and we already know it won't be good. But it is a look backwards and any moderation which shows the rate slowing may spur the market up. If the trend looks like it is accelerating, watch for a selloff. Good luck!

Market outlook: More of the same!

Have you been enjoying the market rise this week. Well get ready for more of the same. I know, you don't really believe it or are just anxious the market will just drop like a rock. That is how the psychology has been affected by continued daily dropping of the Dow and S&P 500. It can make you be afraid fro a very long time. And on any market pullback it can reenforce those fears. That is why many of us are saying we have changed a generation of investors. Some may never venture back into the market again in their lifetime. They have been decimated. They don't have extra cash sitting on the sidelines to put back into the market at this time.

So here wee are with Futures today pointing up. The VIX Index closed at 40.06 yesterday. One surprise was that the Fed has been buying long term Treasury debt and this has created concern about the value of the dollar. Hence Gold is up this morning over $60/ounce to $948, a real surprise move.

Citigroup has really taken off. As I posted I bought more shares at $2.41/share and watched the price sore yesterday hitting a high of $3.30 but closing at $3.08, but in pre-market it has jumped again to a high of $3.65 and currently is at $3.49/share. From my original purchase price of $1.70/share the stock is up over 100% and rising.

Ford is also doing well. It closed yesterday at $2.47 and in pre-market it is currently at $2.74. My purchase price for this stock is $1.90 so this is up now 44%. It will continue to rise to over $3.25 in my opinion.

And lastly both ETF's TNA and SSO have come back strongly and should continue to move up. Don't forget that Options Expiration is tomorrow and anything can happen. Today volatility should increase as possibly shorts start covering ever stronger as we approach 810 on the S&P, which is a major resistance level. Good luck! Oh, and if you haven't voted in my Mini poll, please do as it is on the right menu margin.

Pre-Market outlook March 18th: Cautious (UPDATE)

It's a good feeling to be able to guess correctly the markets direction over a number of days. I wanted people to see their 401K's and retirement accounts grow a little as it has been painful for many. The Dow closed today within a few points of 7,400 and the S&P 500 closed at 778. The VIX Index closed at 40, which a long way from the 50 level we had experienced for such a long time. The Put to Call ratio closed yesterday at 0.78 or just slightly down from 0.80 level on Monday. Gold ended the day yesterday at $916/ounce and in pre-market is at 902.

The news of the day yesterday was the level of bipartisanship surrounding the outrage of the bonuses to the AIG employees from the Division who were responsible for the collapse of AIG and required subsequent bailout by taxpayers. These contracts for these bonuses were in place during the Bush Administration and were known about apparently by former Treasury Secretary Hank Paulson, according to news reports. But the outrage from both sides of the aisle enjoined Democrats and Republicans for the first time since President Obama took office. Many are speculating that Tim Geithner, Treasury Secretary, may have his own job at risk for not stopping these bonuses from being paid. We shall see.

Again, the news seems to be favorable enough, or not negative, to continue with this uptrend. However, we are now approaching the final few days before Friday's Options Expiration and anything can happen in Options week. Yesterday I purchased additional shares of Citigroup to add to my original position which I bought at $1.73/share. Today's purchase was made at $2.41/share.

The Futures point down this morning as the CPI Index came in at up 0.4%, which was higher than expected and may foretell of a rise in inflation. Also, today is day 2 of the FOMC meeting of the Federal Reserve and investors are nervous as to what they may say later today. My guess is that the market will open down and stay down most of the day. Having said that I am hoping for a reversal in the final hour or so to have an up day.

UPDATE: 8:15am

Dow has been down all morning from -135 to -89 points where it is now. The Dow seems to keep trying to climb back up and over the 7.300 level. However, Citigroup has surged today making my purchase at $2.41/share yesterday look brilliant as it has hit a high of $3.30 and currently is sitting at $3.19/share. I predict this stock is going to go to $5/share or higher, if the market continues its climb back to over 8,000. This also is worth mentioning. I had to sell my Apple shares at $96.35/share and it was a difficult decision as the stock was still going up. Today the stock is at $100/share so I left $3.70/share on the table when I sold it or a 3.5% potential gain. But I used the money to buy Citigroup and today alone it is up over 25% and 30% from my purchase at $2.41/share. The moral of this story is this. Be willing to move a portion of your money to a faster or more rapid growing stock you have researched or discussed with your financial advisor. It opens more opportunities for you but also adds more risk. I saw Citi with less risk than most other stocks, including Apple, because the government is backing Citi and owns about 40% of the company. The government is making money on Citi right now, why shouldn't you!

The reasons the stock market will rise this week!

Ok, this is what you have been waiting for, the resons the stock market will rise this week. First, President-Elect Obama officially announces his economic team today. This will boost confidence. In addition, the government has agreed to guarantee the Loan portfolio of Citigroup to the amount of $300 Billion and added $20 Billion additional funds from TARP. It makes Paulson look ridiculous because he had said there wasn't a need to spend any more TARP funds and that the he was successful in stemming the financial crisis and calming down markets. He now has to eat his words. But that is a small price to pay for getting it right.

Also, reason this week will see markets rising is that this is Thanksgiving week, and the last thing Retailers want is to see the stock market go down just before Friday, the biggest shopping day of the Christmas holiday.

And finally, markets abroad in Europe are showing very positive gains in premarket action here as did Asian markets last night. The world is linked together more now than ever.

So sit down and watch the markets rise this week and hopefully see your portfolio a little fuller than it was last Thursday.

THe financial crisis slowly plods along. We're lucky it is giving experts time to think about solutions!

Main Street media is reporting that the government is considering a bailout of Citigroup. Citigroup also has already received a $25 Billion package from the TARP funds, so many wonder what Treasury is now considering as its options. Citi lost its bid for Wachovia to Wells Fargo. While at the same time the Administration and those of the Obama Administration are trying to calm and stabilize markets here and abroad. All this while many are ambivalent about a bailout of the Auto Industry and specifically GM. This is leading to our friends abroad in Europe and Asia wondering whether the U.S. is going to have an unfair advantage over rivals, many of which are made in those regions.

They will not let Citigroup fail. So right now it's all about speculation. One of the reasons Citi finds itself in this situation is the loss in their stock value at $3.94. One thing which would help is if the SEC re-instituted its Uptick rule to prevent continued shorting of the stock by speculators. It was the worst decision in SEC recent history to abandon the rule. Many have called for the head of Christopher Cox, head of the SEC and a Bush appointment. It seems too late for that but Cox could reinstitute the Uptick rule and help minimize a further slide in the share price. I just don't have any confidence in him doing that. It would be admitting he made a mistake and that is something the Bush Administration will not consider.

But in spite of it all, I believe this week ahead will be good for the markets. I'll state why tomorrow. Come back then.