This Timing Outlook reading is 9.5, or “positive,” up from 9.0 last time. That makes 8 of the last 9 readings positive, with just one “neutral” interruption a few weeks ago.
The S&P 500 index has stayed above its March 9 close for 22 consecutive weeks. It is pretty clear now that March 9 marked the end of the bear market that began in late 2007. That is not to say that this may not be a “bear market rally,” that is, a short-term bull market contained within a much longer bear market. But at five months duration and a 49% gain without significant retreat (the biggest drawdown was about 8% in June-July), this rally has proved itself to be sustained and investable.
I have been buying into it in 5% chunks of my “stock money.” My first purchase was on April 2, and after multiple purchases, my Capital Gains Portfolio is now >90% invested, after having been 100% cash for many months during the bear market. If the market keeps going up, I will make one or two more purchases, exhaust available cash, and be 100% invested soon. I am protecting profits with 8% trailing sell-stops.
2. Market Performance Since Last Outlook
New Outlook (8/12/09): 9.5 (POSITIVE)
Last Outlook (7/25/09): 9.0 (POSITIVE)
S&P 500 last time (7/25/09): 979
S&P 500 now: 1006 Change: +3%
S&P 500 at beginning of 2009: 903
S&P 500 now: 1006 Change YTD: +11%
S&P 500 at close 3/9/09: 677
S&P 500 now: 1006 Change since 3/9/09: +49%
3. Indicators in Detail
· Conference Board Index of Leading Economic Indicators: No new report since last time. This indicator has risen for three straight months, making it positive. +10
· Fed Funds Rate: The Fed Open Market Committee met today, and in its report, it did not raise rates, and it indicated no intent to do so for awhile. 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. +10
· S&P 500 Market Valuation: According to Morningstar, the S&P 500’s P/E rose from 15.8 to 17.0. Still below 17.4, so this indicator remains positive. +10
· Morningstar’s Market Valuation Graph is 1.00, same as 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 low of 0.62 coincides with market’s March 9 low.) +5
· S&P 500 Short Term Technical Trend: The S&P 500’s chart remains positive. The index and its three key simple moving averages (SMA) line up in the most positive way. For this indicator, we look at the two shorter SMAs: index > 20-day SMA > 50-day SMA. That’s the most bullish arrangement you can have. +10
· S&P 500 Medium Term Technical Trend: Same story. This indicator considers the index plus the two longer SMAs. We have index > 50-day SMA > 200-day SMA. Not only that, the 200-day SMA has bottomed out and is just beginning to go up, also a bullish sign. +10
· DJIA Short Term Technical Trend: Same story as with the S&P 500 chart. Positive. +10
· DJIA Medium Term Technical Trend: Same story. +10
· NASDAQ Short Term Technical Trend: Same as S&P 500 and DJIA. Positive. +10
· NASDAQ Medium Term Technical Trend: Same story. Positive. +10
TOTAL POINTS: 95 NEW READING: 95 / 10 = 9.5 = POSITIVE
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