Timing Outlook Rises to Strongly Positive

1. Summary

After six straight positive readings, the Timing Outlook fell last time to 5.5 or “neutral.” But the Timing Outlook's ten components include six technical indicators, and the market’s rally in the last two weeks turned five of them positive. The result is a very high “positive” reading this time of 9.0.

The S&P 500 is now 45% above its March 9 low. The index has stayed above its March 9 close for 20 consecutive weeks, so it is still possible that the March 9 low marked the end of the 16-month bear market that began in late 2007. Some would say that it has already achieved that status.

2. Market Performance Since Last Outlook

New Outlook (7/25/09): 9.0 (POSITIVE)

Last Outlook (7/10/09): 5.5 (NEUTRAL)
S&P 500 last time (7/10/09): 879
S&P 500 now: 979 Change: +11%%

S&P 500 at beginning of 2009: 903
S&P 500 now: 979 Change YTD: +8%

S&P 500 at close 3/9/09: 677
S&P 500 now: 979 Change since 3/9/09: +45%

3. Indicators in Detail

· Conference Board Index of Leading Economic Indicators: New report issued this week went up, the third straight month of increase. That improves this indicator from neutral to positive. +10

· Fed Funds Rate: No change. The Fed Funds rate remains < 0.5%. Ten cuts (with no increases) since 8/07 brought the rate to near zero, plus many Federal programs continue to inject money into the economy. Fed Chairman Ben Bernanke announced recently that he foresees no rate increases in the near future. +10

· S&P 500 Market Valuation: According to Morningstar, the S&P 500’s P/E rose from 14.3 to 15.8. At a value below 17.4, this indicator remains positive. +10

· Morningstar’s Market Valuation Graph is 1.00, up from 0.92 last time. This means that Morningstar feels that the 2000-or-so stocks they cover, taken as a whole, are fully valued. That makes this indicator 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. Most recent [and all-time] low of 0.62 coincides with market’s March 9 low.) +5

· S&P 500 Short Term Technical Trend: The S&P 500’s rally, which began on March 10, turned backward in a four-week span in late June and early July, but caught fire since then. The index is up 11% in the last two weeks. The index and its three key simple moving averages (SMA) now line up in the most positive way. For this indicator, we look at the two shorter SMAs: index > 20-day SMA > 50-day SMA. Positive. +10

· S&P 500 Medium Term Technical Trend: This indicator considers the index and the two longer SMAs. We have index > 50-day SMA > 200-day SMA. Positive. +10

· DJIA Short Term Technical Trend: Similar to the S&P 500 situation, except here, the 20-day and 50-day SMAs are essentially identical. That makes this indicator neutral. +5

· DJIA Medium Term Technical Trend: Same as the S&P’s medium term technical trend. Positive. +10

· NASDAQ Short Term Technical Trend: Same as S&P 500. Positive. +10

· NASDAQ Medium Term Technical Trend: Same as S&P 500. Positive. +10

TOTAL POINTS: 90 NEW READING: 90 / 10 = 9.0 = POSITIVE

Remember, the Timing Outlook is meant to increase the value of buy and sell decisions by helping them get off to positive starts. Dividend investors are faced with many fewer buy and sell decisions, because their focus is on rising dividends, not the prices of stocks. Learn more about The Top 40 Dividend Stocks for 2009 by clicking here.