Market Outlook for May 28, 2009

Futures point up this morning as Durable Goods Orders showed a 1.9% gain for April. But March numbers were revised down 2.1%. All 3 Indexes show small moves up this morning and are not something that can be counted on for the day. While Weekly Jobless Claims were reported down this morning to 623,000 for the past week. But Continuing Claims reached a new high at 6.79 Million.

Still there is a lack of clarity as to what the strategy is for the Government regarding trying to keep mortgages available with cheap interest rates but the Treasuries for 2 year and 10 year duration seemed to suggest rates will be rising, which would seem to thwart the Fed's plans to keep Mortgage Interest rates low. The Bond market is getting nervous and hence the big swing down yesterday.

Oil is up again to $63/barell. Gold hovers around $955/ounce as Silver has moved over $15/ounce. European markets are all down this morning as well.

As we travel through the no mans land of 8,200 to 8,600 on the Dow waiting for a clear direction, none seems to be showing itself. But pressing the markets continues to be the decline in the 200 Day Moving average daily for all 3 Indexes, the Dow, Nasdaq and the S&P 500. If I were to guess, and we all know that's all it is, I believe the market will be down again today but not by more than 100 on the Dow. We are going to stay in this tight range until some news breaks to drive these markets decisively. That could take the whole summer, I'm sorry to say. Or there could be something Internationally which triggers the drop.

Market summary for May 27th

Today started positive in all 3 Indexes, the Dow, the Nasdaq and the S&P 500, but they all ended down today, giving up much of yesterdays gains on about the same, to slightly higher volume. The volume is still low considering the 50 day Moving average Volume. The Nasdaq continues to flirt with trying to staying above the 200 day Moving average, as it has stayed above the 200 Day MA for 4 days in a month. For the past 2 days it has managed to stay above it, which currently crosses the axis at 1,700. Today's close was at 1,748. Tech's have led the Market up for the past 3 months, but seem to have staled out at the 200 day MA the past 2 weeks.

The Dow closed today at 8,300. The 200 day MA crosses the axis now at 8,900. While there still is room for the Dow to climb, it too has stalled the past 12 days in a tight range of between 8,200 and 8,600. The Dow's volume has been below the 50 day MA volume 19 out of the past 23 days. We need to have a breakout either above or below 8,200 and 8,600 to see where the next trend is going to take us. To me this and especially the 200 Day MA line are is going to limit the upside move.

The S&P 500 closed today at 893. The 200 day MA crosses the axis at 930. We reached a climax on this Index on May 8th when the Index closed at 930. Since then we have taken a step down. The range here is from 885 to 913. This 200 day MA is dropping at a rate of about 15 points a week. So if we stay exactly where we are now, the 200 day will be pressing on the Index to go lower in 2 weeks. That should take us past the Unemployment numbers for May as well as the GM bankruptcy to determine the impact on the market.

Treasuries rose sharply today as the curve between 2 year and 10 year was the steepest on record on concern surging sales of U.S. debt will overwhelm the Federal Reserve’s efforts to keep borrowing costs low. Ten-year notes have lost 10.3 percent this year, according to Merrill Lynch & Co. indexes, while 30-year bonds have lost 27.5 percent. The unprecedented government borrowing has created concern about a rise in consumer prices. Policy makers have expanded the Fed’s balance sheet to $2.2 trillion while excess reserves at U.S. banks have increased to $896.3 billion.

The VIX closed up and closed at 32.36, while the Put to Call ratio closed at 0.86, up from yesterday's close of 0.72 for the day.

Market Outlook: Thursday March 25th and beyond (UPDATE)

Well we closed up for the day yesterday. A battle is going on between the Bulls and the Bears. Yesterday the Bulls won but it was touch and go for most of the day. We are in no mans land on the Dow and S&P 500 because it has not been determined if we are going up or going down yet, even though we closed up yesterday and back up over 800 on the S&P. The Put to Call ratio closed up yesterday to 0.86 from 0.76 on Tuesday and 0.70 on Monday.

Market is opening up but I tell you we can still go in any direction because the trend is not clear as I write this. The Weekly Jobless claims came in at 652,000 while the number of people getting weekly benefits rose to 5.5 Million recipients.

We still don't know if the banks will sell toxic assets and we won't for at least a month. So many are still in limbo as Geithner's toxic asset plan is based upon bank participation.

The auction yesterday for Treasury's did not go as well as hoped. This caused the market to drop mid-day. So skepticism remains strong and we have a less than enthusiastic investors which makes for a tight range on the Indexes. It looks like we will stay here for a while but as we approach the end of the quarter watch investors buy some bank stocks to dress up their portfolios because they moved up nicely from their lows and they want to show those having accounts with them that they owned those stocks during the quarter. It's all a game for show and after the end of the quarter they can and often sell some of these shares bought at quarters end.

I think a wise strategy is to have some cash right now and not be fully invested. When the trend becomes more clear then changes can be made to either buy stocks or raise more cash. But that's where I am currently.

UPDATE 9:45am PST

The Dow and the S&P 500 are clearly above the 50 day and now 60 day Moving average. The Dow is now at 7,839 and the S&P 500 is at 824.

UPDATE 3:00pm PST

I decided to sell my TZA at a loss today for $48.50. That was a big loss of $10/share. However my TNA shares remaining and SSO shares have made the loss in TZA as an insurance policy worth it.