Sunday, August 9, 2009

Week In Review [$SPX, $COMPQ & $RUT]

Stocks rallied Friday after the latest employment numbers showed signs of a stabilizing job market. The Labor Department report showed 247,000 jobs were cut from nonfarm payrolls last month, less than the 320,000 expected, and the prior two months were revised to show 43,000 fewer jobs were lost from payrolls than first reported. It's been a good run for the market but it is looking a little overbought, but the underlying support is there. I see a brief period of consolidation, the markets will move upwards again.
Caution is warranted here as Mohamed El-Erian, chief executive of bond fund manager Pacific Investment Management Co, said Friday that U.S. stock markets are on a "prolonged sugar high" and that the bull market is unlikely to last. ~read story~

The big news this will be the FOMC meeting on Tue/Wed and their announcement on interest rates. They are not expected to make any changes but there is always the danger that they will modify their statement to include some indication of when they will start raising rates. The bond market is already pricing in higher rates with the 10-year note yield closing on Friday at 3.85% and the highest in nearly two months. The prospect of a rebounding economy is being felt in the bond market. Over $75 billion in debt will be sold this week and interest rates are rising. The Fed could help the Treasury by applying pressure to rates in order to make the auctions go smoother. There are $37B in 3-year notes on Tuesday, $23B in 10-year notes on Wednesday and $15B in 30-year bonds on Thursday.

My observations and call is that individual should take some money off the table on the big gainers like FCX or AA. Keep some cash on hand as I expect a pullback nearterm, where you can redeploy that cash on a longer term play.

*NOTE the S&P500 Percent of stocks above 50, 150 & 200 day moving averages is at overbought levels. Although they can stay there as the market grinds higher, it is a warning sign. ~see chart~ At the bottom of today's blog is a video clip from CNBC of Carter Worth,Oppenheimer Asset Management and the Fast Money of favorite chartist.

*click charts to expand images

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