4.24.09

4.24.09

          Is the rally running out of steam or not? The Dow was up only 0.6% last week, leveled off from the big weekly gains since early March. And thru Thursday it was down 2.1% for this week but was able to make up some of its loss. But it still closed down for the first time in six weeks. But even so it has done a good job of ignoring the return of bad news to be down only that much.

          It was the hope in economic reports for January and February that were released in early March that helped sparked the rally (plus the more important technical conditions of the major indexes being extremely oversold).

          But so far the reports for March are showing those better reports for January and February, particularly home sales, retail sales, and Durable Goods orders being up, were just temporary blips in the numbers.

          Over the last two weeks the reports have shown that retail sales returned to the downside, down 1.1% in March, Industrial Production returned to the downside, down an unexpected 1.5% in March, new housing starts were back to the downside, plunging 10.8%, with permits for future starts plunging 9% in March.

          Yesterday the report was that Existing Home Sales were back to the downside, declining in March. We do need home sales to show consistent strength or this economy cannot get any better.   

          And just a few minutes ago, it was reported that not only were Durable Goods Orders back to the downside in March, declining 0.8%, but the previously reported big increase in February was revised down.

          So the economy seems to be running out of steam again even if the rally has not. The only major index that was up for the week was the NASDAQ.

Next Week:

          There’s a fairly large schedule of potential market-moving economic reports next week, including the next revision of estimated GDP for the 1st quarter, Consumer Confidence, and the ISM  Mfg Index, as well as the Fed’s two-day FOMC meeting and announcement.

          The economic reports for March and early April will be more important than usual, providing indications of whether the encouraging improvements in January and February, particularly in retail sales, durable goods orders, and the housing market, were an aberration, or were early signs of the economy bottoming.

          So far, the latest reports have not been all that encouraging in that regard, with retail sales declining 1.1% in March, home sales, and durable goods orders back to the downside in March, after lifting hopes with increases in January and February.  But the market has continued to climb the wall of worry, although at a more anemic pace.

We are still 100% in cash going into next week.

Till next time,

The MTA Staff