Insights

Market Wrap – Stock’s Gain for Fourth Straight Week

Looking at the weekly charts of the Dow and the S&P 500 you see that this is the fourth week of gains for both indexes.  Closer examination shows you that before these four weeks up, we had four weeks down.  Before the four down weeks we had four up weeks.  The first four upside weeks gave us a move of 531 points and then the downside four weeks was for a loss of 653 points.  The last four strong weeks we have experienced have added 1,224 points to the Dow bringing the total for the last twelve weeks to 1,102 points which compares well to the very strong four week rally we got out of the bottom in March of 1,391 points.

The S&P 500 gained 63 points in the first four weeks, lost 67 in the second and gained 131 in the last four weeks to yield a total move up of 127 points.  The first four weeks off the bottom for the S&P 500 totalled 159 points.

It has been a pretty good four weeks.

The big question always is – what about the next four weeks?  What about next week?  What about Monday? Next week we get an FOMC meeting, lots of economic news, a barrage of bond issuance and another week of earnings.

Earlier today the Dow traded up through the 9,410 level which represented a a retracement level according to Fibonacci Theory.  The Dow closed back down at 9,370.07 and for today, selling according to this retracement measuring theory would have you out at a good price.  Only time will tell if Fibonacci turns out to be correct this time and there is always more trading next week.  For more Raked InSights on Fibonacci see an earlier post from today or our Market Wrap from July 24th, 2009.  The Dow Transportation Average closed at a new high for the year at 3,749.58 just as the Dow Jones Industrial Average notched its highest close of the year at 9,370.07 and this, according to one tenet of the Dow Theory, confirms that the market is a Bull Market.  Looks like happy days are here again – except of course for the 500,000+ people who saw their unemployment insurance run out AND the 247,000 people who lost their jobs.

The Dow gained 113.81points today (+1.22%, 9370.07) and the S&P 500 gained 13.40 points (+1.34%, 1010.48) with the Nasdaq 100 being the percentage gain laggard only moving up 19.20 points (+1.19%, 1619.49).  Who would expect tech to lag the market?  With the financials having been taken apart so badly in the market meltdown and oil dropping from the 140 to the 30 area you could argue that there is more potential for moves to the upside as the stocks in these sectors may have been sold off too hard.

The sector leaders today were consumer cyclicals +3.84% and finance at +3.62.  When traders are buying cyclicals that hard it shows what they are thinking.  With a move to the upside of this magnitude in the cyclicals either there was a lot of short covering going on OR the players really are starting to believe in this economic recovery story.  The fears of a double-dip recession seem to be fading.

The spark to this rally today was the 8:30 a.m. Employment Situation report which was expected to show another 300,000 jobs lost.  The number came in at a smaller loss of 247,000 which was 467,000 last month and in the 600,000+ for the months of December through March.  The bulls are seizing on this decline in lost jobs as showing the worst is over for this economic cycle and that means BUY STOCKS!  Then again by definition Bulls buy stocks.

Over the past week more and more stories are seen about the end of the recession and how fast the economy is going to grow.  The bad news is that one term keeps being uttered and that is ‘Jobless Recovery’.  Some market prognosticators scoff at such a recovery while others say it is a very real possibility.  Economists almost never agree so why should the universe of financial writers?  Should this ‘Jobless Recovery’ or a double-dip recession occur it very well could turn into Obama’s boogeyman.  Of course with some good job numbers coming out this morning, Obama was on TV taking credit.  The one thing he should be careful of while doing this is he will have to own it if this ship goes jobless or double dip.  Right now we have stocks up, job losses down so let’s not push our luck and talk about housing, not yet.

The way it stands now is four straight up weeks for stocks.  The financials are on fire.  AIG (NYSE: AIG) had another 20% plus up day today (+$4.61, $27.14) as THEY MADE MONEY! Wasn’t this the left for dead, derivative riddled carcass of the financial melt-down?  In the last three days AIG has popped from $13.52 to $27.14.  Not bad – a 100% return in 3 days.

Lazarus has risen from the dead.  Had to leave you all on a good note.

Have a great weekend.