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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
December 7, 2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata
Financial
Last week, the war between bulls and bears
over S&P 500 1,100 intensified. Bulls won the initial skirmish Monday as
the UAE central bank, with its oil-riches behind it, pledged their liquidity
to help Dubai solve its previously mentioned debt problem. Tuesday brought a
bump in pending home sales for October and Friday’s surprise jobs
report showed “only” an 11,000 decline (-125,000 expected) with
significant positive adjustments for September and October. Less reported was
that state withholding taxes were up for the first time in a while,
confirming these positive payroll trends. Bears could take solace in the continued
breakdown of the market’s technicals. The
leaders in the rally up, Goldman Sachs (GS) and Apple (AAPL) have
“turned over” and have traded down for the last few weeks as the
market averages have continued higher. The number of new highs continues to
shrink with each push higher and multiple attempts to break out above 1,113
for the S&P 500 have been thwarted. These type
of divergences can continue until the cows come home but do increase the
probability of the elusive correction bears have longed for. While pleasantly
surprised by these trends in unemployment, it does have its consequences. Mr.
Market has now bid up Fed funds futures for mid-2010 anticipating an earlier
reversal of the Fed’s 0% rate policy. This will affect banks which currently
count on these artificially low cost of funds to produce their profits. With
their costs rising, profits will drop leading to lower prices for financials
(they have been underperforming for the last few weeks). Washington’s
unintended consequences footprint was felt by Bank of America (BAC) which was
unable to hire a CEO at government wages and floated $19 billion of new dilutive
equity to pay back $45 billion of TARP so they could hire a CEO at prevailing
wage. A potentially significant long-term bullish signpost was spotted in numerous
polls released in the last few weeks suggesting the possibility of larger
gains in the House and Senate for Republicans in 2010 than would normally be
expected. Historically, a split White House/Congress have been periods of
significant gains as the uncertainty of change dissipates. Game plan: The decision to move stops
below the 50-day moving average has netted some nice outperformance overall
and allowed for faster rotation into the new “movers”. I’ll
continue to move up stops along this trend line which will continue to allow
participation in any upward movement, but protect us when Mr. Market decides
to head south.
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