A New Bull Market?

Last week I went to my CPA last week who said, "How'd you make money last year? I'm impressed."

I told him it was through active management and sector rotation and as we move further into 2009, I'm hopeful that you and I can have the same conversation with our CPAs at tax time next year.

The markets remain volatile but a sea change is at hand that looks like the beginning of a new bull market, at least for the short term.

Thursday, April 9th, brought significant changes to the tone of the market. The most significant was the trend change to positive indicated in the S&P 500 chart below.

You can see here how the green column of Xs broke above the bearish resistance line, indicating a positive trend change.

Also many other sector ETFs have moved above their bearish resistance lines for the first time during this bear market and we can see broader strength in the numbers below:

83% of all NYSE stocks are above their 50 day moving averages

38% are above their 150 day moving average

33% are above their 200 day moving average.

So you can see gathering short term strength here but plenty of room on the upside with only a third of all stocks in long term up trends.

We've had a meteoric rise off the March lows and so I am expecting lower prices and a short term correction at the beginning of this week. How long that lasts or how low it goes is uncertain, but a correction down to 815 on the S&P could be expected, followed by a new leg up.

Leading sectors for the week were Financials (XLF) Real Estate (IYR) and Latin America (ILF) while Silver (SLV) and Gold (GLD) were the laggards as capital left the precious metals for the equity markets.

In big picture news, the Federal deficit is now three times higher than it was a year ago and will approach a record $1.75 trillion for the year as the Fed and Obama administration pour money on this raging financial fire. This staggering figure is 12% of GDP which truly has frightening implications for our financial well being down the road.

This week we have some serious earnings reports coming from the financial sector with Goldman Sachs (GS) reporting on Tuesday, JPMorgan (JPM) on Thursday and Citigroup (C) on Friday.

It should be another exciting week.

The Week Ahead

Tuesday: March Producer Price Index, March Retail Sales, February Inventories

Wednesday: March Consumer Price Index, April Empire State Indes, March Industrial Production, April Homebuilders Index

Thursday: Weekly Jobless Claims, March Housing Starts, April Philly Fed.

Friday: April Consumer Sentiment

Disclosure: None

Comments

[William Cowie:]

Sadly, this bull market is driven by government funneling our tax money into the banks' earnings, which in turn boost their stock prices and therefore the Dow. That, in turn, spurs program buying and voilà! Le Bull.

Obama got roasted for the market's drop earlier this year. Think anybody in the White House is going to repeal PPIP and let the market go down again?

The best term for this rally is the Taxpayer Bull.

Apr 13 08:05 AM

[investor88:]

Agree bull for the short term ["gathering short term strength", "correction to sp500 at 815 then new leg up"]. Enjoy the rally and then re-assess.

Apr 13 08:42 AM

[Alphameister:]

My view is essentially the same. Not likely, if this is a new bull, that it will carry to new highs for the indices, but it's a great opportunity to make money on the long side.

Apr 13 09:25 AM

[Mutual Fund...:]

The 50 - 150 - 200 day moving averages are just that, a moving average and certainly not an indication of where the market place will be in any given time frame. If it was a true indicator of bull and bear markets a lot of people would have lost a lot less money last year.

I have made up my own charts that give better indications of market volitility than those. ps. I didn't lose money either....

Doug T.....The mutual fund guy.
www.mutualfundwealth.com/

Apr 13 11:30 AM

[Fred Voetsch:]

Buy high and sell low; that's the ticket.

I love these guys...and anyone who didn't make money last year is a complete idiot as I have never seen a more obvious case for a bear market...until now.

Apr 13 01:55 PM

[E Nuff Sed:]

All recessions end at some time - even the great depression ended.
And there are bull markets even within a secular bear (i.e. the secular bear market started in 2000 which continues today but we were in a bull market from 2002 to 2007) - so there is money to made if you can time your entry and exits to some exits (for both longs and shorts).

Apr 13 03:25 PM

[Scooter-Pop:]

TARP & TALF have the Market following a Wolf cloaked in a Sheep's Skin. Beware Investors, as I can't see any Jobs Growth when I snatched the sheep's hide off the Tax Payor Backed BIG Banks. Leave the safety of GLD-Gold and embrace the impending calamity of TARP & TALF supported equities. I must see two consecutive weeks of Unemployment Applications decline before the REAL BULL runs again, dumps Gold and returns to equities.

Apr 13 10:16 PM

[Francisco M...:]

Cetin, do you work for the government? Fundamentally speaking; watch out the Bear is back in town and ready to break off your horns.

Apr 13 11:15 PM

[Stockmajor:]

I, for one, love Cetin's blatant positivity! Sharpen them horns, Cetin!

Apr 14 12:35 AM

[Freya:]

This is the start of a new cyclical Bull market, it does not have to make new all time highs. All it has to do is be confirmed by the Transports, it has been.

The Next move to the downside, meanwhile, Does Have to move to lower lows and be confirmed by the Transports, to remain a Bear.

I don't believe the Transports will confirm,and with positive divergence in hand, the Markets will move much higher.

The Secular Bear between 1966 and 1982 had quite a few cyclicals, none of which had significant All time Highs.

The consumer has nothing to do with Bull Markets, they usually start to participate when its almost over.

Apr 13 09:58 AM