Market news and outlook April 29th

Major data was released this morning on GDP. For the first Quarter GDP was down 6.1% and this is the 3rd consecutive quarter of negative GDP. Exports for Q1 were down 30%, the lowest since 1969, while Imports were down 34%. Consumer Spending increased 2.2%. Inventories declined 2.7%. Home Investments showed a 38% decline and Business Investment in Structures was down 44.2%.

In Pre-market the news seems to be shrugged off, as Futures are still positive with the Dow up 71. Watch the market carefully today, as we may have the breakout many of us have expected. I happen to think it has a higher probability of dropping than going up, but I am right only about 67% of the time. To me the news is very bad and I don't see why the market is still up. It was significantly less than the -4% GDP expected.

I asked myself if I have changed my spending patterns recently since the scary market decline and I would have to admit only slightly. I still go out to local restaurants, but since I don't need any new equipment or appliances, I am not really spending much.

The Swine Flu seems to be growing at a relatively slow pace, which is good. The first U.S. death was reported in Texas today of a 23 month old toddler. Hopefully this scare will dissipate and the concern lessoned. We don't need this crisis on top of all the crisis we still face. The large Banks are still very much in trouble and the release of the Stress Tests on the top 19 Banks will be announced on Monday. So the market seems to be waiting, apparently frozen at current levels. Today is also President Obama's 100th day in office and the general tone from that should be good with him garnishing a 69% approval rating.

BANK OF AMERICA HOLDS THEIR SHAREHOLDERS MEETING TODAY AND THE VOTE TO KEEP THE CEO KEN LEWIS WILL MAKE NEWS EITHER WAY. Many expect him to be outed by angry shareholders. Quite honestly if he is outed as CEO it is difficult to predict the market's reaction on Citi stock but I have bet that Banks share prices will drop going forward so we shall see what this meeting does today, to that end.

I remain pessimistic regarding a market advance. I believe this rally has been a Bear Market Rally and not the beginning of a new Bull Market. There is an emerging Commercial Real Estate crisis added to the home foreclosure problem still front and center, with each additional layoff contributing to more foreclosures in the system. Next week April Unemployment numbers will be released which will heighten the concern. Layoffs are still in the mind of Executive decision makers in many if not all businesses. This is not a good sign. Preserve Capital until the picture of the future shows more promise.

Don't forget to vote in the Mini Poll on how long the recession will last on the right margin. Vote only once per month. data will be summarized next week.

Early market action: What it is telling me today.

As I watch the opening bell this morning and watched the quick run up on the Dow and the Nasdaq, I watched what was happening to the Ultra Short Russell 2000, symbol TWM. Well before the opening it was at $84/share and I have watched it steadily increase to where it is now after only 15 minutes the market opened. It currently sits at $93.55/share so it clearly is gaining traction. Simultaneously the Nasdaq was up over 40 points and has since backed off to being up only 18 and the Dow, which was up about 400 points has backed off and now sits up 250 points.

What does this mean? There is skepticism about the move of the market in the past 2 days and that may mean many are selling into the rally. I don't trust it either! Preserve Capital!

UPDATE: Market closed down, as predicted, with the Nasdaq down 65 points to 1779 and the Dow ended down 77 to 9311. TWM gained 5 points to $99.95/share. And Volume was down as well. It was lower than all of days daily volume during last weeks decline,

Today is a Bear Market Rally. Sell into strength to preserve cash

That's correct, this is a relief rally because of the coordinated moves in the EU. If your stocks have scratched back a sizable gain, you should consider selling some of the stock today as the rally continues and more tomorrow if the market continues its rise. Because, the markets will drop back to the recent lows in days to come and will set new lows. It has happened many times in the past and if you observe how the Nasdaq dropped from the Dot.Com bust in 2000 to 2001, there were many times where everyone thought the bottom was in only to see the markets drop again to new lows. Let history be your guide.

Check back as I will continue to write about markets here. When we are at the bottom I will declare it. For now I am trying to help you save your funds and preserve capital until things stabilize. We are not stable yet and have quite a long way to go.