Weekly Commentary March 30 thru April 3

This is the third week in a row that the Dow is positive. In fact, the Dow has staged a dramatic comeback, up 21%. And while the Dow is still down 12.25% for the year, being down 12.25% is a far cry better than being down 33.25%.

Start waving the flag, yell out hurray, the Market is booming again, lets all start buying stocks. Not!!!

Let’s take a look at how the Market is now trading. On Monday, the Market was up nearly 500 points. That was the third straight Monday to be up. But came Tuesday, and the Market tanked again. On Thursday the Market was up over 170 points. But come Friday, and they basically gave it all back again, down almost 150 points.

What does this show us? The Market is in swing trade mode, buy on Monday, and sell off Tuesday morning and take profits. Buy on Thursday and sell off Friday morning and take profits. Buy and Sell, not Buy and Hold. Look at the S&P 500 E-Mini Future for example. Monday’s close — 818, Tuesday’s close — 803, Thursday’s close — 827.25, Friday’s close — 815.50. For the week, we lost just over 3 points.

What does this show us? For the week, we did not go anywhere. Why? Because we are in a trading range. Buy one day, sell the next. Buy — Sell, Buy — Sell. Not Buy and Hold. The great bull Market of the last few years was built upon Buy and Hold, not Buy and Sell the next day as fast as you can and take your profits.

This shows us that the Institutional money is still on the sidelines. The monthly Treasury report, Foreign Net Purchases of U.S. Long-Term Securities, known as the TIC report, showed us that. Unfortunately the TIC report comes out 2 months behind. But January’s numbers revealed that almost no international group (country or hedge fund) is buying and holding US securities or US corporate bonds. There is some buying of US Treasuries, but even that is 33% less than December.

Bottom line…the jury is still out as to whether the last 3 weeks was a change in direction from bear market to bull market, or whether it was just a big rally in the middle of a bear market. Next week we will see just how sustainable the rally is. We have Consumer Confidence on Tuesday. On Wednesday we’ll see the,ADP report, Construction Spending and ISM Index, and Auto and Truck sales. Then comes Friday and the new unemployment numbers. Already 7 states are experiencing over 10% unemployment: Michigan, South Carolina, Oregon, North Carolina, California, Rhode Island and Nevada. How many more states will be added to the mix come April? With this amount of economic news, the Market will really have a lot to overcome to remain in positive territory.

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