9.21.07

9.21.07

             We were one the many who were surprised by the Fed’s action this week. It turned out to be a pleasant one however. A 50bps cut in interest rates on Tuesday ignited the stock market. The NDX closed out the week up 2.43% adding 1.22% to our 16.96% giving a total for the year to date of 18.18%. The Fed’s action was indeed a direct move to counter the housing market problems created in part by the sub-prime mortgage debacle. The big question is will there be some adverse ramifications from this move? The Dollar had already been weak, and this will tend to exacerbate the situation. It will make imports more expensive as already seen in the price of oil hitting $82 a barrel. The weaker the Dollar, the less foreign goods it will buy. Remember when the Canadian Loonie was valued at 85 cents? Well on Friday it hit parity with our dollar, the first time in 31 years. The old saying “be careful what you wish for, you might get it” may be appropriate in this case. We will be watching it carefully and keep you advised. For now the Bulls seem to be in full control, but as we all know, those things can change quickly. Let’s enjoy it while we can.

            All the indices had a nice move this week and broke above resistance in many cases. When this happens, what previously had been a resistance point now becomes a support point. For those of you who consider yourselves ‘technicians’ you may want to look at the market in weekly increments. This shows the ‘legging up’ process the market goes through in its march upward. If we are indeed in a new leg up it will be apparent quickly. We will see the bulls attempt to take the market back to or above their summer highs. This is the reason that we recommend putting the other half of our money in the market at this time. It may feel a little uncomfortable to be adding money, but if we wait for the ‘perfect time’ we may find ourselves eventually having to pay more to buy in later.

            The NDX, S&P 500 and Russell 2000 respectively gained 2.43%, 2.80% and 3.78% on the week. All three indexes are now again above both their 50-day and 200-day exponential moving averages (EMAs).

            We are now in the market with a 1.0 beta. We continue to hold the NDX position for 50% and have moved the other 50% out of money markets and into the Dow Jones Industrials.

Till next time

The MTA Staff