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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
March 16, 2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata Financial
Last week, the vigilantes declared victory. The week started out with Warren
Buffett becoming an honorary member of the market vigilantes by coming on
CNBC and asking the administration to “focus” on the banking
crisis and wait on other priorities. There was hope that a message from this
strong an Obama insider would “consolidate” the
administration’s message, but nothing came. Adding insult to injury was
the administration’s protectionist lean on Bank of America (BAC) and
Microsoft (MSFT) to end their policy of hiring foreign workers through the
H1-B program, in lieu of Americans. The vigilantes responded with yet another
punishing day to the downside to
decade-plus lows. Tuesday’s open was marginally higher, but then the
white flag was raised by the administration, first by Fed Chairman Bernanke clarifying
to the market that nationalization of the banks is off the table, alleviating
fears of bank stocks and their preferreds going to zero. Then Barney Frank,
head of the House Financial Services committee, suggested a look at the
“mark to market” rules (to help bank capital requirements) and reinstating
the up-tick rule (preventing short sales without a trade higher) and the
market took off. Frank’s counterpart in the Senate, Chris (I really
don’t know Angelo Mazilo [Countrywide loan scam]) Dodd, chimed in about
an hour later adding gasoline to the fire confirming his support. Obama’s pander to the Chamber of
Commerce Thursday and Larry Summer’s remarks Friday confirmed the administration’s
about face on its renaming business the evil empire and its surrender to the
vigilante’s cause. With this behind us, we can focus back on the
market’s fundamentals and technicals. The fundamentals are still awful,
but there was some glimmer of hope in retail sales numbers reported. At times
like these, the technicals are where the focus should be. We bottomed on
Monday just below SPY68 on nice volume and rallied above the previous low of
SPY74. What we are looking for is a technical pattern of higher highs and
higher lows. A pullback off of a move as sharp as last week is to be
expected, but SPY68 needs to hold. Conclusion: An important, necessary, but
insufficient step has been taken getting the Obama administration to
“do no more harm”. A case can be made for a bottom, but it is
unconvincing. Fortunately, the discipline in managed portfolio sets up nicely
either way. If we continue down, cash will cushion the hit. If the market
continues up, securities sold last fall will be bought back 20+% cheaper as
they will cross their respective 200-moving averages shortly and be added to
portfolios. I’ll be watching.
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