6.12.09

6.12.09

            Now is a time when we need to step back and do a re-evaluation of where the market is heading and the things that are important in that scenario.

Some of the more meaningful things going into this mix are:

1.     Texas Instruments said that demand for semiconductors is improving and boosted guidance for the current quarter. The news helped technology stocks outperform during Tuesday's session.

2.      The announcement by 10 major banks that they are ready to repay $68 billion the government had lent them as part of the TARP plan.

3.     The Fed's beige book showed that the deterioration of business activity is abating.

4.     Weekly jobless claims came in lower than expected.

5.     The Dow is the only Major indicator below it’s 200 day M.A., and it is close to going thru it.

It is this kind of news that shows that we are seeing some improvement on the economic horizon.

          Big problems hiding in the bushes are:

1.   The U.S. must print massive amounts of dollars to pay for the rescue efforts and to stimulate the economy. The huge extra supply has moved the dollar significantly back to the downside again.

2.   Mortgage rates track with 10-year Treasury bills. The falling dollar and thus bond prices, create rising interest rates which have spiked the 30-year mortgage rates to a national average of 5.79% last week. That’s up from 5% in just two weeks, and up from the 50-year low of 4.7% in April. That low 4.7% rate in April began to entice would be home buyers into the housing market. It was hoped the low rate would also encourage home-owners to refinance their mortgages, cutting their monthly payments, with the extra cash providing a boost to consumer spending.  But the window of opportunity stayed open only briefly.

3.   JP Morgan Chase says refinancing activity has dried up again. And the real estate industry is concerned that mortgage rates above 5.5% will be a big stumbling block for the hoped for beginning of the housing recovery.

4.   Very low volume since mid-April, averaging around 1.2 billion shares trading on the NYSE, became even more anemic, with only 0.85 billion shares traded on Friday. There is very little participation now even among short-term traders.

For the week the market was basically flat. Blue chips were up fractionally while the smaller and more speculative stocks of the NDX and the R2K were down fractionally. As the market tries to make sense it all, we will be watching carefully. It is however starting to look like some predictability is coming back into the market . So be ready, we may be getting a green light soon.

Till next time

The MTA Staff