I am not a believer in the stock market rally. The market is up approximately 28% in the last six weeks and now we are at a battle ground of around 850. We are over the 50 day moving average which is sitting at about 791, but is still below the 200 day moving average which is sitting at around 975.
The market has had this huge of run up in this short of a period of time please take some profits. I was worried a couple of months ago that we had gone through support of a long term double top and were headed a lot lower. The S&P bounced back above that support, and went up through the 50 day moving average, but there is still resistance overhead at the 200 day MA.
We have had a good run, but we are at solid resistance.
Someone has to show me the case where the economy gets better soon. I keep hearing how banks are not lending and people are having trouble getting credit. The government is preping Chapter 11 papers for Chrysler, GM is shutting down for 11 weeks this summer. Oh wait I forgot the bright spot. The number of people losing their jobs is slowing down. That is great, but the total number of people getting unemployment is still going up each week.
I am at a crossroads right now. The economy sucks, but there is part of me that thinks we have seen the low at 667. That being said, I don’t see how we go back to normalized earnings if our auto industry and parts makers go bankrupt. Even if they do come out of bankruptcy we are looking at 1/3 of their employees being laid off so that the companies can be viable at the new production levels.
I am putting all of my new funds in cash and I have my old portfolio in 45% stock, 33% corporate bonds, and 22% cash equivalents. Right now I do like the minerals and commodity companies, because I believe China is going to turn the corner first. The US Consumer is going to keep saving for a while which is not good for the US economy.
As always read the disclaimer. I am not a registered financial adviser and this is only my opinion and not meant to be investment advise. Please do your own due diligence before investing.
