Timing Outlook Strengthens, Stays Neutral

1. Market Performance Since Last Outlook

New Outlook (4/1/09): 6.5 (NEUTRAL)
Last Outlook (3/20/09): 6.0 (NEUTRAL)
S&P 500 last time (3/20/09): 767
S&P 500 now: 811 Change: +6%
S&P 500 at beginning of 2009: 903
S&P 500 Now: 811 Change YTD: -10%

2. Indicators

· Conference Board Index of Leading Economic Indicators: The March report, covering February, has not been updated since last time. This indicator stays neutral, because there are not 3 straight readings in one direction. Neutral. +5
· 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: The S&P 500’s P/E stays the same at 14. This indicator is positive because it is below 17.4. This metric cannot get “better.” +10
· Morningstar’s Market Valuation Graph is 0.76, up from 0.74 last time, but still well below the 0.90 threshold that would take it out of positive and into neutral 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.) Again, this indicator cannot get “better.” +10
· S&P 500 Short Term Technical Trend: The S&P 500, which staged a rally beginning March 10, has moved above both its 20-day and 50-day simple moving averages (SMAs), but the 20-day has not yet crossed upward through the 50-day SMA. That keeps this indicator neutral. +5
· S&P 500 Medium Term Technical Trend: With the rally, now into its 4th week, the index is above its 50-day but still well below its 200-day SMA. Thus, this indicator has turned upward from negative to neutral. +5
· DJIA Short Term Technical Trend: Same situation as S&P 500. Neutral. +5
· DJIA Medium Term Technical Trend: Same situation as S&P 500. Neutral. +5
· NASDAQ Short Term Technical Trend: The NASDAQ has rallied a bit more than the other two. The index is above both its 20-day and 50-day SMAs, but the 20-day is still slightly below the 50-day SMA. Neutral. +5
· NASDAQ Medium Term Technical Trend: Same situation as with the other two indexes. Neutral. +5

TOTAL POINTS: 65
NEW READING: 65/10 = 6.5 = NEUTRAL

3. New Rating

The Outlook moves up a little to 6.5 on the strength of the three-week rally. This is the best reading for the Timing Outlook in months. Although two previous potential “bottoms” (11/10/08 and 11/20/08) were breached in late February, March 9 now represents a third possible low point in the secular bear market that began in October 2007.

I have been holding out for a 3+ week uptrend, and now we have one. I would be willing to venture some money into the market, perhaps starting simply with an S&P 500 index play backed up by a tight 5% to 8% trailing sell stop.