As per blog entries of recent, the market is moving higher as expected. The break of the top of the trading range (on SPY: 114.67) suggests the seasonal rally is alive and strong. But, (also as previously suggested) one must temper their enthusiasm about the market given the current technical picture. Yes we are moving higher but there is a lot of traffic ahead of us.
For this week I thought I would comment on what I see as the three significant factors effecting stock prices:
Fundamentally, broader market earnings comparisons are still relatively positive as we head into the second quarter of 2010 (that is comparing them to Q2'09 when the worst of the recession was being prices into the market) and the cost of money for short term borrowers is still virtually nothing. Should either of these factors change, stock market appreciation gets difficult at best.
Technically, the broader market continues to point higher as our 'investor signal' remains bullish (that being the relationship between the 13 EMA and the 30 SMA - which in this case is positive and has been so since May 2009) and the recent breakout higher in price confirms that. Those wishing to be bearish will have to wait for a new top (trading range) to form and a subsequent breakdown - which may be weeks if not months down the road).
Finally, seasonally. For long time readers of CRI commentary you will know that if its one thing I drive home it is the seasonal nature of the stock market. To that end, we are heading into the seasonal sweet spot for the broader market and for the commodities markets in particular. There are numerous reasons why this is so (which I don't have the time or space to go into here) but for our purposes, just keep it in mind when thinking of making your next investment.
[I personally will be looking to SELL in May and WALK AWAY....as the old cliche goes....]
That's all for this week,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com
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