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New Stocks Bull Market or Just a Bear Market Rally?

Stock-Markets / Financial Markets 2009 May 01, 2009 - 03:10 PM GMT

By: Anthony_Cherniawski

Stock-Markets

Best Financial Markets Analysis ArticleStress tests?  What stress tests? - The Federal Reserve is postponing the release of stress tests on the biggest U.S. banks while executives debate preliminary findings with examiners, according to government and industry officials.


The results, originally scheduled for publication on May 4, now may not be revealed until toward the end of next week, said the people, who declined to be identified. A new release date may be announced as soon as today, they said.  Regulators and bank executives are concerned about how the disclosure is handled because weaker institutions could suffer a collapse in their stock prices.

Was it Obama?  Or was it the stock market rally? 

Consumer confidence increased in April due to the widespread perception that President

Obama’s economic policies will be effective in improving economic conditions. “Two-thirds of all consumers anticipated that the economic policies of the Obama administration will be effective in improving national economic conditions, with most of the gains anticipated over the next several years,” according to Richard Curtin, the Director of the Reuters/University of Michigan Surveys of Consumers. Favorable views about the effectiveness of Obama’s policies to improve the financial situation of consumers were not as widespread, as four-in-ten consumers thought the policies would be effective in improving their own financial situation. “Consumers continued to report that their finances remained dismal and their buying plans were still on hold due to concerns about their future job and income prospects,” Curtin said.

 Is this a new bull market…or just a bear market rally?

SPX.png -- U.S. stocks began May on a less-than-sunny note, with major indexes sliding as investors paused to assess the previous month's surge and the U.S. economy's chances of recovering as hoped.

A 33% recovery in two months will have to be digested by the market before much more gains are realized.  That means a retest of the lows may come soon.  The first line of demarcation will be the 50-day moving average, shown on the chart.

 

 

Treasury bonds are taking a pounding.

Bonds.png -- Treasury 10-year notes fell for a fourth day and are headed for a sixth straight weekly loss as credit markets thaw and speculation grows that the worst of the global recession may be over.                                               The decline, which would be the longest weekly losing streak in almost two years, comes as an industry report showed manufacturing in the U.S. shrank in April at the slowest pace in seven months. The Treasury plans to sell  $71 billion of notes and bonds next week, to finance a widening budget deficit, bank bailouts and fiscal recovery packages.

 

 

 Gold is noticed as a hedge against currency risk.

Gold.pngGold fell in New York on speculation that the dollar will strengthen on signs that the U.S. economy will resume growing later this year.                                        Gold analysts are divided between the prospects of inflation reappearing due to “overstimulation” by U.S. fiscal policies and the prospects of deflation if the stimulus packages don’t work.  There is yet another factor not being considered.  Virtually all major developed countries are devaluing their currencies through massive loans.

 

 

 

Japanese stocks advance but future is uncertain.

Nikkei.png(Bloomberg) -- Japanese stocks jumped, sending the Nikkei 225 Stock Average to a near four-month high, as forecasts from Fujitsu Ltd. and Canon Inc. lifted optimism corporate earnings will recover in 2009.  Electronics firms were able to cut prices and reduce unsold inventory, giving them a leg up on other manufacturing concerns.  The big problem seems to be that deflation makes the cost of servicing loans higher while cutting net revenues.  The future outlook is mixed.  Only 40% of companies polled expect profits to rise. 

 

 

Chinese stocks poised…is it up or down?

Shanghai Index.png-- The Shanghai Composite Index, rose 9.38, or 0.4 percent, to 2,477.57 at the close on Thursday, extending gains this month to 4.4 percent as record new lending helped drive up share prices. China’s markets are closed today for a holiday.              The Shanghai Composite has jumped 36 percent this year, the second-best performer among 90 global gauges tracked by Bloomberg. The measure has advanced on optimism a 4 trillion yuan ($585 billion) stimulus package and new loans will prevent a slump in the world’s third-largest economy.     

 

 

              

What happens when governments get in the way?

US Dollar.png-- Federal guarantees by 13 countries on more than $400 billion of financial company bonds are punishing the AAA-rated World Bank Group with record borrowing costs -- an indication of what can go wrong when government gets in the way.                                                  The sudden rise in World Bank relative bond yields is an unintended consequence of sales of taxpayer-backed debt by more than 50 companies, including Goldman Sachs Group Inc., Bank of America Corp. and JPMorgan Chase & Co.

 

 

 

Are commercial properties the next shoe to drop?

 Housing Index.png Two years after fissures in the residential housing market gave way to a national collapse of home prices and sales, experts warn that the commercial real-estate market is the next shoe to drop, bringing more woes to the battered economy. Thousands of commercial mortgages valued at hundreds of billions of dollars are approaching their renewal dates, and by some estimates, two out of three no longer will meet the original loan conditions and won't be able to refinance. With prices for commercial properties expected to plunge, a vicious cycle could unfold, much as it has in the nation's housing market.

 

 

 

 

Gasoline holding steady for the Summer.

Gasoline.pngEnergy Information Administration Weekly Report suggests that, “The national average price for regular gasoline dropped a penny to $2.05 per gallon. The price was $1.55 less than the price a year ago. On a regional basis, price changes were small and mixed. On the East Coast, the price dropped about a half-cent to $2.04 per gallon. The average price in the Midwest slipped almost two cents, dropping below $2 for the first time since April 6 to $1.99 per gallon.”

 

 

 

Economic downturn reflected in natural gas prices.

Natural Gas.pngThe Energy Information Agency’s Natural Gas Weekly Update reports, “While price movements during the week appeared to reflect changes in weather, recent market trends also reflect fundamental conditions in the natural gas marketplace. Most significantly, the economic downturn has resulted in a decline in consumption, particularly in the industrial sector, with many companies announcing layoffs and closures of manufacturing plants around the country.”

 

 

Inside the housing boom and bust.

Thomas Sowell has written a book with the caption above.  For those who are not familiar where the root of the housing bubble lies, this book is a must-read.  Here is an excerpt.


For far too long, too many people have regarded home ownership as "a good thing." It is certainly true that home ownership has its benefits. But, like everything else, it also has its costs and its risks.

Weighing such trade-offs is something that each individual and each family can do for themselves. It is when such decisions are made by politicians — of whatever party — that trade-offs tend to vanish into thin air, replaced by pursuit of a "good thing."


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Anthony M. Cherniawski,
President and CIO
http://www.thepracticalinvestor.com

As a State Registered Investment Advisor, The Practical Investor (TPI) manages private client investment portfolios using a proprietary investment strategy created by Chief Investment Officer Tony Cherniawski. Throughout 2000-01, when many investors felt the pain of double digit market losses, TPI successfully navigated the choppy investment waters, creating a profit for our private investment clients. With a focus on preserving assets and capitalizing on opportunities, TPI clients benefited greatly from the TPI strategies, allowing them to stay on track with their life goals

Disclaimer: The content in this article is written for educational and informational purposes only.  There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

Anthony M. Cherniawski Archive

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