The Markets Fail Again

One of the most pleasant aspects of being a newsletter writer is that I get to meet and work with some very interesting people.

One of these is Trang Ho, the ETF Reporter for Investors Business Daily who knows more about ETFs than just about anyone. She's a terrific writer and I wanted to share two recent articles of hers that I think you'll find interesting.

The first is about the psychology of investing which we've discussed in these pages many times and the second is about Jack Canfield, "The Chicken Soup for the Soul," creator and how his programs help high achievers in all walks of life.

I invite you to take a moment to read these two fine pieces (see here and here). Just by clicking on the second one, you'll help Trang raise $500 for the American Red Cross. If she gets 20,000 clicks in a week, the newspaper will give her a $500 bonus which she has pledged to donate.

For the week, we had good results with (SLV,) iShares Silver Trust, our newest position in the Standard Portfolio as it gained +6.6% after our entry on Monday morning.

The Standard Portfolio gained +1.1% for the week while the Ultra gained +0.4% and the S&P declined -0.4%.

This week the markets attempted to breach the critical 875 level on the S&P 500 and failed for the second time in recent weeks.

The action is clear in the chart above and points out how resistance was met at the 870 level and then fell back.

Also, in the chart below, you can see how price is now at the upper end of its most recent trend channel and encountering stiff resistance here.

In my opinion, a pullback to 800 or lower would not be unexpected.

As I mentioned, the markets were virtually flat for the week in spite of Friday's rally. This coming week, more than 150 S&P companies will report earnings and so far earnings are on track for a -35% decline year over year.

The FDIC closed four banks on Friday, adding a $700 Million bill to the FDIC and corporate bond spreads remain at 5 times normal which indicates continued fear in the corporate bond market.

Bloomberg reported on Friday that insiders sold 8.3 times more stock than they bought this month, the highest level of insider selling since October, 2007, when U.S. stocks peaked and the current 17 month bear market began. Furthermore, insiders made their smallest amount of purchases since July, 1992.

The details of the 19 largest banks' long awaited stress tests are starting to emerge, and no surprise, it's now anticipated that most will have to raise more capital to stay in the game, perhaps as much as $70 Billion. Peanuts when compared to the trillions that have been thrown at this crisis so far.

And next week is "D-Day" for Chrysler as Thursday is their deadline for making a deal with all of their stakeholders and Fiat in a ticking clock attempt to avoid bankruptcy.

Big ticket items for next week in addition to ongoing earnings announcements are the last act of the Chrysler drama and the Fed Open Market Committee meeting on Wednesday.

The Week Ahead:

Some potential market moving reports ahead this week:

Tuesday: February Case/Shiller Home Price Index, April Consumer Confidence

Wednesday: 1st Quarter GDP,

Thursday: Weekly Jobless Claims, March Personal Income, March Consumer Spending, April Chicago Purchasing Managers Index

Friday: April Institute of Supply Management Report, March Factory Orders, April Vehicle Sales

Sector Spotlight:

Weekly Leaders: Silver, Homebuilders, Malaysia.

Weekly Laggards: Oil, Consumer Staples, Financials

Disclosure: Long SLV, TBT

Comments

[ksmithdc:]

Interesting read, thanks.

Apr 27 09:34 AM

[kelm:]

I am not sure insider selling is the gauge that most think it is in the conditions we find ourselves. If I were an insider and had the vast majority of my money in my own company stock I would need to get some out and diversify at this juncture even if I thought the company was fine. That is basic risk management. The markets and economic direction remain uncertain to a degree that would force me to do that. The real question is what are they doing with the proceeds. Money is flowing into this market. yes, we have hit resistance but I see consolidation occurring at this point. We may go back down to 800 or not - time will tell. I do think this is a bear market rally but looking at the technicals I don't see an impending major sell-off like I did in Oct 2007.

Apr 27 10:05 AM

[Mutual Fund...:]

I'm really fed up with these chart guru's. Where were they when investors needed them last year PRIOR TO the market crash??

I tend to agree with Cetin Hakimoglu's post.

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

Apr 27 02:20 PM

[djc:]

Mutual Fund Wealth:

They were there. They were talking.

However, since you seem to have a very closed mind to technical analysis you probably roundly panned em when they were talking about the double-top in the S&P, and probly thought the market was gonna go to-de-moon !

No insult intended, but Id guess that its not the TA guys who changed - just your eyes that got openned.

Apr 27 05:09 PM