5.21.10

5.21.10

          The week ahead is a big week for market data, including multiple readings on housing and consumer confidence. There will be data on durable goods, personal income and spending, and the Chicago purchasing managers report. I am particularly interested in home price data, although this is subject to massive spinning, mostly negative. I also closely watch the Michigan sentiment indicator and initial claims, which I see as good indicators of employment. The Chicago Purchasing managers are often a good read on the ISM index. I do not expect the European debate to reach an instant conclusion, but the upcoming news is difficult to predict. This will take years to play out. Most observers are (unwisely) trying to make definitive predictions of an outcome where the situation is evolving and fluid.

          SEC filings by the likes of Warren Buffett, George Soros, and other large investors who must report changes in holdings, shows they sold large amounts of stock from their portfolios in the first quarter.  Then there is the fact that Warren Buffett, George Soros et al do not normally cut back market exposure on expectation of only a 10% pullback.

          From the technical side (which we prefer), with several of the market’s longer-term support levels broken, if an oversold rally does get underway it will probably be smart to pay attention to overhead resistance levels as possible upside limits to a rally. One such resistance level is the 20-week moving average of the S&P 500. It was previous support that was recently broken. If it now becomes overhead resistance it is about 5% above the market’s current level.

          It will be an important week ahead for the market, no doubt. We are still 100% in CASH.

Till next time

The MTA Staff