4.27.07

 4.27.07

For four weeks in a row all five of the major indices have moved to the upside. They

have averaged 7.71% since we put on our last BUY signal on March 13, just six short weeks ago. Annualized that is 66.8% which shows us that the market looks like it has gotten ahead of  itself right now. Most other pro’s think so also. The market however has shown in the past that it can stay in an overbought mode for long periods of time. The Dow is in new all-time high territory, having been up for 19 of the last 21 trading days, and over +800 points in April. We look for economic news to take center stage this week. Yes earnings reports will still be important but, and this is a big but, if there is any weakness in Monday’s Personal Income and Consumer Spending reports it may be looked as a reason to bank some profits. The end of next week will be the Jobs Report which is also closely watched. So what should an astute investor do?  Our advice would be to take half off the table and bank it, and keep the other half invested. Remember you will never go broke banking a profit. This is not a PPP in the true sense of things. We are not suggesting a change of direction in the market trend. Rather we are saying that the market needs a pause to digest the gains of the past four weeks. With Oil closing at over $66 a barrel on Friday, it adds to the overall problem of keeping inflation under control.

Remember, we are not a 100% mechanical discipline like others lay claim to. We mix fundamentals and technicals together with common sense to generate our signals. Right now fundamentals and common sense are telling something different than what the technicals are showing. In this particular case we are going with the former rather than the latter. We will be moving out of our position in the Russell 2000 Monday morning. We will keep our position in the SP500 at the same level as now. This will give us a beta of .50 or 50% invested.

Till next time

The staff at MTA