New Outlook (3/20/09): 6.0 (NEUTRAL)
Last Outlook (3/4/09): 3.5 (NEGATIVE)
S&P 500 last time (3/4/09): 835
S&P 500 now: 767 Change: -8%
S&P 500 at beginning of 2009: 903
S&P 500 Now: 767 Change YTD: -15%
2. Indicators
· Conference Board Index of Leading Economic Indicators: The March report, covering February, showed a decrease, following 2 months of small increases, which had followed decreases in 6 of the preceding 7 months. This indicator stays neutral, because there are not 3 straight readings in one direction. Neutral. +5
· Fed Funds Rate: The most recent Fed action left rates unchanged. Overall the Fed Funds rate remains at 0.5%. There have been 10 cuts since 8/07 totaling 4.75%. There is nothing more the Fed can do with interest rates to make this indicator “better.” Of course, the stimulus bill was signed and money has started to flow; the Fed this week indicated intentions to inject > $1T into the economy; and the Fed, Treasury, and FDIC are implementing other bailout, helpout, and stabilization plans, so there is a lot going on in Federal policy. +10
· S&P 500 Market Valuation: The S&P 500’s P/E is 14, up from 12 last time. This indicator is positive because it is below 17.4. This metric cannot get “better.” +10
· Morningstar’s Market Valuation Graph is 0.74, up from 0.72 last time, but still well below the 0.90 threshold that would turn it neutral. (Historical data: All-time low = 0.55 on 11/20/08. Value at end of dot-com bear market = 0.78 in 10/02, which kicked off a 5-year bull market.) Again, this indicator cannot get “better.” +10
· S&P 500 Short Term Technical Trend: The S&P 500, which staged a rally in the past week, moved above its 20-day simple moving average (SMA), but both are below its 50-day SMA. That makes this indicator neutral. +5
· S&P 500 Medium Term Technical Trend: Even with the rally, the index is below both the 50-day and 200-day SMAs. Thus, this indicator is negative. +0
· DJIA Short Term Technical Trend: Same situation as S&P 500. Neutral. +5
· DJIA Medium Term Technical Trend: Same situation as S&P 500. Negative. +0
· NASDAQ Short Term Technical Trend: The NASDAQ rallied more than the other two, and the index is now above both its 20-day and 50-day SMAs. Positive. +10
· NASDAQ Medium Term Technical Trend: Index is above its 50-day SMA but below the 200. Neutral. +5
TOTAL POINTS: 60 NEW READING: 60/10 = 6.0 = NEUTRAL
3. New Rating
The Outlook jumps to neutral from negative on the strength of the rally over the past few days. The Timing Outlook is considered neutral anywhere between 4.0 and 7.0.
Two previous potential “bottoms” (11/10/08 and 11/20/08) were breached in late February, with a new potential “bottom” appearing on March 9, from which the market has rallied.
Despite today’s neutral reading, I would repeat that until a clear upward trend appears, I would not purchase any stock at this time, with the exception of a well-valued long term dividend stock or a very short-term trend play. The rally over the past few days does not yet constitute a "clear upward trend." I'd like to see 3+ weeks before venturing back in.
