Daily Investment Interpretations

May 10, 2011

2011-5-10 (Tuesday Night): The markets closed up yet again today. The NASDAQ Composite gained 28.64 points (1.01%) to close at 2,871.89. The Dow advanced 75.68 points (0.6%) to close at 12,760.36, while the S&P 500 added 10.87 points (0.81%) to close at: 1,357.16. Oil jumped to $103.65; Gold rose to $1,516. The VIX fell 1.25 to 15.91. 
    David Moenning sums up nicely the gap between the frothiness of the news and the underlying realities: Making It Difficult. He observes that when the dollar goes down, dollar-denominated assets, including the U. S. stock market, go up. What most of the financial media do is give a "balanced" (no commitment) review of what's happening. In the meantime, I believe the S&P 500 will fulfill the prediction that it will cross something like 1,450 on or around the first of September. That' 112 days from now. It closed today at 1,357, so it would have to gain something like 93 points over the next 112 days. It rose almost 11 points today. Obviously, it's going to have to do a lot of backing and filling if it is to rise only 93 points in 112 days. 
    What we're seeing at the moment is a market that has been moving higher over a period of 26 months, with lots of pullbacks along the way. From April 26, 2010, when it peaked at 1,220, to February 18, 2011, when it peaked at 1,344, it rose about 120 points over a period of about 10 months, or about 12 points a month. From February 18, when it peaked (as mentioned above) at 1,344, to May 2, when it peaked at about 1,370, it rose at a rate of about 10 points a month. At that rate, it would hit approximately 1,410 by September 1, and 1,450 by year's end. 

    Of course, this is all absolutely dodgy. The markets will presumably roll over when they reach their cyclical bull market peaks. I would expect the S&P 500 to at least revisit its 2007 bull market peak, and I would expect to see that occur in 2012. But in the meantime, sophisticated investors are going to have to be repeatedly convinced that the economy is getting ready to nosedive. That's the only way they can be euchred into taking losses on some of their carefully chosen investments. I'm personally thinking in terms of long-term investments in the major indices, either in leveraged ETFs or in long-term, deep-in-the-money calls on leveraged ETFs.
    Michael Ashbaugh has written: Ashbaugh- S&P shrugs off commodity crash
    Market futures are up slightly tonight.