The S&P 500 settled above the 1,200 mark again on Thursday setting yet another key benchmark For the market on a weekly and yearly basis. It is trading at its highest level since September 2008. In the past two months alone, the index posted a gain of nearly 13 percent, closing in the green 30 Of the past 42 trading sessions. While this bullish momentum may be well received by some, the rate of Acceleration might be making others a bit nervous because most of this rally has been lighter volume Than usual. One tool widely used by technical traders to determine the momentum of a particular
Futures contract is moving averages, which serve to smooth out price fluctuations, highlight trends, And define support and resistance levels.
Since the March lows last year, the S&P’s 50 day moving Average has been one of the benchmarks broadly used to spot patterns and movements. In particular Investors pay attention to large movements away from moving averages, with the assumption that the index could be entering overbought levels. For example, in the past six months and on average, the S&P traded within 2 percent Of its 50 day moving average. As of Wednesdays close, the index is 6.5% over this mark. So far in 2010 The S&P 500 advanced nearly 9 percent. Keep in mind that the average yearly return for the index in the past 15 years stands at 8 percent, with a median value of 14 percent. Although a bullish trend may not necessarily mean that the Market is overvalued, it could certainly serve as point of reference as per when investors may start Taking profits off the table. Therefore the questions remain. Will there be a correction in 2010? If so, when and how severe might it be? In my opinion we will have to watch the technicals on a daily and weekly basis to answer That question.
On a fundamental basis this week earnings reports and economic releases have been strong. The only weakness is the continued poor data from the Labor department concerning jobs. Nothing New here as the data has been very weak for what seems a lifetime. Today’s jobless data showed people filing for Benefits rose 24,000 to 484,000 in the week ended April 10. Many economists had this number forecasted down
To 440,000 from 460,000 the week prior. However manufacturers are showing stronger data. Factory production climbed 0.9% After rising 0.2% in February.
Regional data from New York and Philadelphia’s Fed banks showed manufacturing accelerated in April. New York’s Empire State Index climbed to 31.9, a ninth consecutive month of growth, up from 22 in March. Chairman Bernanke spoke this week to the Joint Economic Committee of Congress. His response to the on going Jobs situation was tepid at best, saying “a significant amount of time will be required to restore the 8.5 Million jobs that were lost during the past two years.” But also added that “consumer spending should Be aided by a gradual pickup in jobs and earnings, the recovery in household wealth from recent lows, and some improvement In credit availability.” Bernankes prepared statement spoke to what has been happening in the stock indices.
The market has been prepared for weak job growth and is not shaken when the data is neutral at best. It has been more Concerned with how companies are growing on their balance sheets and showing profits. It has been said that one of the last Issues to be resolved when an economy is coming out of a recession is job growth. We’ll see if this rings true in the coming weeks And months or if a double dip and selloff in the market is coming in the second fiscal quarter. Weekly Swing numbers will be released on Monday’s Daily S&P report.
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