04.04.08

4.4.08

         Monday the stock market closed out the first quarter on a winning note, but the gains weren't enough to avoid yet another month of declines.  The end result is that the S&P 500 extended its losing streak to five consecutive months. That’s its longest losing streak since 1990.

        Monday's outing was accented by a handful of developments, the most prominent of which was a proposal put forth by Treasury Secretary Paulson to enact a sweeping overhaul of the U.S. financial regulation system. The main problem they face is time. It will take a long time to get it done. And it would be better if we had someone in office that really cared.

         There is a general recognition that the first days of a new quarter is often governed by a bullish bias. The monies that are built up from contributions to pension funds are put to work at this point. Fittingly, the financial sector led Tuesday's rally with a massive 7.5% gain that was compounded with short-covering activity.

          The last three days of the week were nothing to write home about, but did add to the gains in a minor fashion of sorts. Over the past five days the Dow gained +3.2%, the S&P 500 +4.2%, Nasdaq +4.9%, and the Russell 2000 +4.5%.

Year-to-date, the Dow is now down -4.9%, the S&P 500 -6.7%, Nasdaq -10.6%, and the Russell 2000 -6.8%. The Dow rose 391 points on Tuesday and finished the week up 393 points. So right now everyone is celebrating the market turn-around. We do need a little more than one big day before we can see the fireworks show.

            The volatility index has been dropping, a good sign, and we think the next big test for the market will be when the large financial companies report 1^st quarter earnings. April 16^th is J P Morgan day, followed the next day by Merrill Lynch, and the next day by Citigroup. We know their earnings will not be good, but more importantly their outlook for the rest of the year will be studied for signs of hope and not despair.

            The main question now is, “Have we seen the bottom yet?” The answer is a resounding, Maybe!  I will be working on that answer over the next few days. Say tuned.

Till next time

The MTA Staff