5.4.07

5.4.07

There is a saying on Wall Street, “Let the trend be your friend”. And indeed it has been very friendly for the past eight weeks. The “Bears” have gone into hibernation. Out of the last 24 market days only 4 of them have been down days. Don’t fight the tape. Enjoy the run-up while it lasts, because it will end somewhere. Until then let’s take what the markets give forth. The indices are clearly running ahead of the fundamentals. Be that as it may, we have seen this happen many times in the past.   

With the Dow, S&P 500, and Nasdaq coming into today's action with respective gains of 6.2%, 5.2%, and 5.6% for the month, a rally built on a batch of quarterly earnings results that merely checked in better than lowered expectations offered little incentive for investors to keep forging ahead with the idea that it will never end. May thru October are the worst months for stocks. This only means that you stand to make less profit during this period of time. Over the past 25 years, the market has been up 60% of the time. Better than expected earnings are what had been driving this market. Remember though, what had been expected was lower than last year. On a comparable basis it’s nothing to get excited about. After turning in such an impressive performance in April, it wouldn't be surprising to see investors finally start to question whether valuations will be sustainable over the near term.

For the most part, earnings reports from important companies are all but behind us now. The Fed will be meeting next week and we expect them to leave interest rates as they are. Oil was on the way down this week from a high of $66 to close at $62. As long as it stays below $66 a barrel we see it as no problem for the market.

The Nasdaq 100, S&P 500 and Russell 2000 respectively gained 0.25%, 0.38% and 0.77% on the week.

Till next week

The MTA  staff