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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
June 1, 2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata
Financial
Last week, interest rates moved to the front
of the line for investors to focus on. We opened the holiday-shortened week
Tuesday by learning of a missile launch from North Korea which frightened the
futures market sending them lower (and a run into the dollar), but by 10am it
was ancient history when the consumer confidence number was released showing
a significant increase (who are they talking to?) jolting the averages
significantly higher for the day. Wednesday brought the first strike of the
newly resuscitated bond market vigilantes as they sold off the 10-year
Treasury to 3.70%+ yield (lower price, higher yield), a new post-crisis high,
which pretty much claimed the gains in the stock market from the previous
day. Thursday’s jittery market was pacified when the results of the
7-year Treasury auction were released showing acceptable demand, again
rallying the market, and the rest of the week continued this pattern of
selling off on interest rate worries and rallying when they mitigated,
closing the week with a fierce Treasury rally driving down the 10-year to
3.47%, with parallel gains in stocks. Continued US dollar weakness (after
Tuesday’s early morning fear-inspired rally) led to a post-crisis high
in oil and gold which was taken as positive sign that global recovery
(demand) was continuing as was most news this week. Credit continues to
behave and money continues to be raised sans government guarantee. Even word
that over 9% of homeowners in the U.S. are now delinquent on their mortgage and
an imminent GM bankruptcy was set aside as Mr. Market seems to see recovery
in our future. Cash-laden investors and the shorts continue to wait for the
10%+ correction, but frustration is what the market does best, not letting
either in at the prices they desire. One item not discussed much this week,
but certainly relevant, is that the S&P 500 is now within 1% of its
200-day moving average. Each day bring the 200MA down and once broached to
the upside, should bring in a plethora of technical buying. Once this spike
occurs, I expect the much looked for correction to occur and will tighten
stops that, to this point, have not trailed the positive move in many positions.
Oil and other commodity-based stocks will continue to populate managed
accounts, but they are very volatile and must be handled with care (tight
stops). Internationally-based U.S. companies are starting to pop as they are
beneficiaries of a weakening dollar that has nowhere to go but down. The VIX,
our volatility index, spent the majority of the week above 30, though closing
below 29 on the market’s sharp rally in the last 30 minutes of Friday.
I’m not ready to take solace from this indicator yet based on these
circumstances. Conclusion: This
3-month rally should blow off with a cross of the 200MA on the S&P500 as
it sucks in the reluctant punters who do not want to miss the train leaving
the station. I will be watching for this scenario to unfold and respond as
suggested above.
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