The Outlook remains in positive territory for a second straight reading, but just barely at a value of 7.5. March 9 clearly represents a possible bottom in the 16-month bear market that began in October 2007--the index has stayed above March 9th’s close for 7 weeks. However, two previous potential bottoms (11/10/08 and 11/20/08) both failed to hold, and the current rally seems to have run out of steam. After venturing 30% of my available “stock money” back into the market in a series of small purchases (each backed up by a tight 8% sell-stop), I am going to pause at this point. The leveling out of the past couple weeks is cause for concern.
2. Market Performance Since Last Outlook
Last Outlook (4/14/09): 8.5 (POSITIVE)
S&P 500 last time (4/14/09): 859
S&P 500 now: 855 Change: -0%
S&P 500 at beginning of 2009: 903
S&P 500 Now: 855 Change YTD: -5%
3. Indicators in Detail
- Conference Board Index of Leading Economic Indicators: The April report, covering March, declined, marking three consecutive monthly declines. That drops this indicator to negative. +0
- Fed Funds Rate: The Fed Funds rate remains at 0.5%. There have been 10 cuts (with no increases) since 8/07 totaling 4.75%. There is nothing more the Fed can do with interest rates to make this indicator “better.” Of course, many other Federal programs (the stimulus bill, purchasing of Treasuries by the Fed, etc.) are injecting money into the economy. +10
- S&P 500 Market Valuation: According to Morningstar, the S&P 500’s P/E moves up slightly again from 15 to 15.5. At a value below 17.4, this indicator remains positive. +10
- Morningstar’s Market Valuation Graph is 0.86, up from 084 last time. It is inching closer to the 0.90 threshold that would take it out of positive territory. (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. Most recent low of 0.62 coincides with market’s March 9 low.) Positive. +10
- S&P 500 Short Term Technical Trend: The S&P 500, which staged a rally beginning March 10, has gone essentially sideways in the past couple weeks. It still displays the pattern where the index is above its 20-day simple moving average (SMA), and both are above the 50-day SMA, but the index is now just barely above its 20-day SMA. This indicator remains positive, but it will turn neutral if the index drops below the 20-day SMA. +10
- S&P 500 Medium Term Technical Trend: The index and its two shorter SMAs remain below its 200-day SMA. That keeps this indicator neutral. +5
- DJIA Short Term Technical Trend: Same situation as S&P 500. Positive. +10
- DJIA Medium Term Technical Trend: Same situation as S&P 500. Neutral. +5
- NASDAQ Short Term Technical Trend: Same situation as with the other two indexes. Positive. +10
- NASDAQ Medium Term Technical Trend: Same situation as with the other two indexes. Neutral. +5
TOTAL POINTS: 75 NEW READING: 75/10 = 7.5 = POSITIVE
