Merry Christmas and Happy New Year!

"But you, O Bethlehem Ephrathah, are only a small village among all the people of Judah. Yet a ruler of Israel will come from you, one whose origins are from eternity past." -Micah 5:2

The above verse was written about 700 BC by the prophet Micah. It predicts the coming of the long awaited Messiah for the Jewish people and the world. Jesus was born in Bethlehem among poor people, from the lineage of King David. He grew up and later established a three year ministry around the Galilee region of the Mediterranean. His life on earth, death, and resurrection fulfilled about 400 Old Testament prophecies which were made over the centuries about him. The mathematical odds of someone doing all these things are too great to even figure-- in fact, mathematically impossible to fulfill for someone who was not the Messiah. Yes, we can debate whether Jesus was actually born on December 25th, and when the Magi actually arrived, but the historical fact remains. The evidence of His Lordship is indisputable.

If you have never accepted Jesus as the Savior of this world, please take a moment now to ask Him into your heart. No matter what you have done, He will accept you into His family as His child! And you may then enjoy the full inheritance which Jesus, the Messiah brings!

Merry Christmas and Happy New Year!

Market Upside Bias Continues.. Watch the BKX

These past weeks have shown much volatility and many tradable swings in the market. As a whole, the major indices have made new yearly highs and/or are ready to challenge highs reached earlier this year. Even the Russell 2000 which has lagged the rest of the market is ready to break to the upside. Keep your eye on the Bank Stock Index (BKX.X) as this index is still looking like it is trying to find a bottom. Although the market indicators such as the Stochastics and MACD are beginning to show it is ready to follow the other indices higher. Banking stocks NEED to participate if this market will move higher. And it will be a sign that the economic recovery is on more stable ground.

Inflation is still relatively benign, interest rates remain at historic lows, and gold has broken down from its recent parabolic rise. The majority of banks are well-capitalized and the TARP fund has been declared a "success" by Washington. (They now want to spend TARP funds on other government projects). All of these are good potential signs for the banking industry, except for Washington's desire to keep spending money. The dollar has shown that it is not in a free fall which remains good for the multinational corporations. A low dollar remains a good potential for earnings overseas. For now, these are historically bullish signs for the market.

Note: The above is for information purposes only. Any decision to buy, sell, or hold a specific investment for a portfolio should be reviewed by your personal investment advisor.

Market Showing More Upside Potential

Most of the indexes and stocks we have written about over the past few weeks have undergone a period of selling activity, as expected. These have showed signs of buoyancy with continued rebounds following the selling. Perhaps this is money that has been on the sidelines, or money managers wanting to get in on this huge bull market before year end. Regardless of the reason, we have seen volatile movements which have resulted in good trading profits on both sides of the market.

The Russell 2000 has still not confirmed a new high but is poised to challenge once again. Gold has started to correct after its parabolic rise. The Bank Stock Index is also poised to challenge a new high. Interest rates remain at historical lows. Treasuries are set to rally again.

Stay tuned for more Marketdoc Report updates. You too can learn to recognize important market patterns!

Technical Weakness Continues

This week the market shrugged off news about the debt extension for Dubai West, the state-owned investment conglomerate. As the market fell over 200 points, buyers stepped in and kept things from getting ugly. My guess is these were the last of the money managers and late-comers to the now-nine-month-long stock market rally. They want to show their investors they did not miss this rally before the books are closed at the end of the year.

Marketdoc took profits on some of the short positions which were held for the past few weeks. Rallies as powerful as 2009 will not give up easily and the market rebounded to a new intra-day high on the Dow and S&P. But be careful! The technical weakness we have been writing about is getting more significant. The Russell 2000, Amex, KBW Bank Index, Dow Transports all failed to confirm the new highs which were seen.

The chart above shows all of the technicals on the Russell 2000 exhibiting signs of weakness. We can see this pattern in many other indices and stocks as well. I still am bullish about our economic recovery. However, the technicals are playing a resounding "bass note" and cannot be ignored! I cannot always explain the "why" part. I just know what the technicals show. Marketdoc put back on more short positions this week as the market made its new highs with little confirmation of these other indices.

Note: The above is for information purposes only. Any decision to buy, sell, or hold an investment for a specific portfolio should be reviewed by your own personal investment advisor.

Russell 2000 Fails to Confirm New High

Over these past few weeks the Marketdoc Report has been writing about the continuing weakness in the stock market. This week brought news of a possible $60 billion default by Dubai World, the state owned investment conglomerate. The markets fell not so much on the news, which came out Wednesday before Thanksgiving, but on the perceived uncertainty involving the credit markets. No one really knows yet how far reaching the effects of a default by Dubai would be. It has the potential of becoming another LTCM (potential $1 trillion exposure) or at least greater than Bear Stearns ($29 billion) depending on how much market exposure Dubai has across the rest of the world. As a side note there is still about $365 billion of unsettled debt from the Lehman bankruptcy. One thing the markets dislike is uncertainty, hence the decline.

If we look at the various indices, we see a consistent pattern of weakness developing. This week the Russell 2000 index failed to confirm a new high that the other indices had reached. This illustrates a potential follow-through of the technical weakness. The above chart shows there is still alot of room left to the downside, even without the news about Dubai. If the Russell breaks support at around 563, then we could see a retest of the July lows. Dow support is at 10,000 (S&P 500 around 1040).

Many traders were away for the Thanksgiving holiday as the markets retreated. The market hit many stops during its trading session Friday. We might continue to see volatility into next week as traders move to square positions, raise cash or lock in 2009 profits. Remember last week, many were talking about the Dow making new highs. Now the economic recovery may be in question. It is not so much about the true jeopardy of our economic recovery as it is the "fear" of a double dip recession that will drive this market. Trading opportunities abound, both on the short and long sides.

Our Marketdoc Report dated November 16th said things could get interesting. They have.

Note: The above is for information purposes only. Any decision to buy, sell, or hold a specific investment for your portfolio should be discussed with your own personal investment advisor.

Happy Thanksgiving 2009

Photo Source: Norman Rockwell archives. "Freedom from Want." As appeared in the Saturday Evening Post, March 6, 1943.


In late November, 1620 about 102 passengers from Delft Haven, Holland arrived in Massachusetts seeking new lives for themselves. These "Pilgrims" sought to escape religious oppression going on in Europe. They sailed four months, braving storm tossed seas and relying on Divine Providence for their guidance. Upon arriving at Plymouth, Massachusetts, the Pilgrims signed the "Mayflower Compact" on December 11, 1602. The Mayflower Compact is known as the first form of civil government, and the first to introduce self-government, which the settlers established after arriving in their New World.

Unprepared for their first New England winter of 1620, about one half of them died before spring. They are buried on the hill overlooking Plymouth Rock. One can still visit their graves there. The survivors reaped a bountiful harvest the next summer after being assisted by helpful members of the Wampanoag Indian tribe. The grateful Pilgrims declared a three-day feast to thank God for their harvest, starting December 16, 1621. They celebrated with about one hundred of their Indian friends. Various independent celebrations occurred in the years following.

Much of the credit for the current national Thanksgiving Day celebration is given to Mrs. Sarah Joseph Hale, the editor of "Godey's Lady's Book." She contacted President after President for over thirty years until President Abraham Lincoln responded in 1863 by setting aside the last Thursday of November to celebrate a national day of Thanksgiving. Here are some of his words:

"A Proclamation.

The year that is drawing towards its close, has been filled with the blessings of fruitful fields and healthful skies... No human counsel hath devised nor hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God, who, while dealing with us in anger for our sins, hath nevertheless remembered mercy. It has seemed to me fit and proper that they should be solemnly, reverently and gratefully acknowledged as with one heart and one voice by the whole American People... as a day of Thanksgiving and Praise to our beneficent Father who dwelleth in the Heavens... and fervently implore the interposition of the Almighty Hand to heal the wounds of the nation and to restore it as soon as may be consistent with the Divine purposes to the full enjoyment of peace, harmony, tranquility and Union....

In testimony whereof, I have hereunto set my hand and caused the Seal of the United States to be affixed.

By the President: Abraham Lincoln, 1863"

This tradition was carried on yearly until 1941 when Congress declared a permanent national holiday. The Thanksgiving tradition revolves around a delicious and lavish meal, usually with Turkey as the centerpiece. A special prayer of thanks typically precedes the meal.

We celebrate Thanksgiving Day as a national day of giving thanks to our Creator God for His Divine Providence which He has shown to our beloved United States of America. Don't let the history revisionists try to tell you that God has no place in our country's history or government. Our founding fathers saw things differently. Although 2009 was extremely challenging for all of us, we still have much to be thankful for.

Happy Thanksgiving everyone. And may God continue to bless America!

IBM at Multi-Year Resistance Levels

The above chart illustrates the tremendous run which IBM has had since hitting its low last November. We can see "Big Blue" is challenging its multi-year resistance levels around 130. This is one of my favorite stocks for which I am usually always bullish. However, this is a rare instance which I have to take a bearish stand on my favorite bellweather tech stock. As you can see, some of the technicals on IBM have started a downward trending slope, or are finishing a topping formation. I consider IBM to be a very "tradable" stock in that profits can be had in either bullish or bearish positions, provided you call it correctly. This is one of those few times I am trading the short side. I expect this stock to pull back to around the 111 level.

This is only one example of several stocks and indexes which I see a similar topping formation. Overall I am still bullish on the economic recovery. Fundamentally the recovery is picking up steam. And people who bought real estate over the past year are glad they did. But I can't ignore so many technical market indicators when they are obvious like this. I am just calling it as I see it without always being able to explain the "why" part. Don't be fooled by the market "experts" who are telling you this market will now move higher after missing the call for the past eight months! Now is a good time to book solid profits for 2009 and set up some puts on many of the indexes and individual stocks which have skyrocketed over this past year. Stay tuned. This could get interesting.

Note: The above is for information purposes only. Any decision to buy, sell, or hold a specific investment for a portfolio should be discussed with your own personal investment advisor.

Dow Transports- Triple Top?

For an idea which way this market is headed, it is good to examine multiple indexes to see if any patterns are developing. Dow Theory states that the Dow Transports should confirm any new high in the other Dow Indexes for a rally to be sustainable. The various Dow Indexes may diverge for a brief period of time but they need to confirm each other eventually. As the chart shows, the Dow Transportation Index appears to be forming a Triple Top. As I look at all the indicators under the Dow Transport model, I see a negative pattern of weakness forming in all of the indicators. This is visualized by the downsloping green line which shows increasing techical weakness. I could be wrong but I see a huge level of resistance forming here. Its anyone's guess how far any pullback will go. I can only point out technicals as they start to develop. If I had to guess I would place the Transports around 3500 which is about a 12.5% correction. Regardless if you think this market will move higher or not, it is a good time to book solid profits for 2009.

This is further confirmed when I see the "experts" in the media have finally jumped on the bandwagon for this long sustained market rally. For months they kept telling everyone to "wait for the bottom." Then we were told to "wait for the pullback." Now we are hearing this market "should move higher" after it has run for the PAST EIGHT MONTHS! (Sometimes I think that just by taking a contrarian approach to the mainstream media is all that is needed to outperform in this market but I hate to oversimplify things that way. That would be too easy.)

Note: The above is for information purposes only. Any decision to buy, sell, or hold a specific investment for a portfolio should be reviewed by your own personal investment advisor.

Dow Closes Above 10,200- Target Reached

Today the Dow Jones Industrial Average posted a close above 10,200. This achieves our Marketdoc Report target of 10,200 first talked about in our July reports. The S&P is closing in on the 1101 level. The market "experts" are now telling everyone that this market "could go higher." Where were these "experts" in July when almost everyone was worried about the end of the civilized world? Now they are telling everyone this market is for real because THEY MISSED IT! The truth is they really do not understand what makes this market run.

For a better idea of how the trend will play out, sometimes it is good to look at other indexes like the NYSE Composite. This index is a more broad index of stocks. As I assess this index it is clear this index is finishing its "topping" formation. We see this topping formation in the Stochastics, Williams %R, and MACD indicators. Unless we see a significant surge upward the index will probably break down around the 7241 level. The Dow has technically broken out above its yearly high of 10,128 which is why we need to look at these other indexes to CONFIRM the breakout. The S&P needs to breakout above the 1101 level. If they do not, then we will see our pullback. Be careful as the other "experts" tell you to join the party just as it is about to end. They used to call it a "suckers rally" when technical resistance levels are breached but then quickly breakdown as the last holdouts jump in. It looks like a pretty good time to establish some puts against those stocks which were bought at bargain basement prices and have risen skyward since March. Now is a great time to lock in profits. Stay tuned to the Marketdoc Report and you, too, can learn to recognize these important patterns in the market. Take a look at our previous posts and you decide if we have called it.

Note: The above is for information purposes only. Any decision to buy, sell, or hold a specific investment for a portfolio should be reviewed by your own personal investment advisor.

Real Pullback or "Stealthy" Correction?

For a better idea on how the overall market is performing some analysts like to look at the S&P 500 Index. They feel the S&P 500 is a better indication of the market because it includes many more stocks and cannot be manipulated as easily as the Dow Jones Industrial Average. The attached chart shows how powerful the S&P rallied through 2009. Since hitting its low of 666.79 in March the S&P has surged to a yearly-high of 1101.36. This is a whopping 65% return in just seven months! The Dow 30 hit its high of 10,120 for a return of 56%! We projected the Dow hitting resistance at about 10,200 with heavy resistance at 10,500. I'll take these results any day. This rally has been for real as the Marketdoc Report has been telling its readers since February.

As I look at the overall market it seems the long-awaited pullback may have been coming in waves over the past few months. Many stocks have already pulled back from their 2009 highs and are poised to run more. Others are just completing their pullback. We have already seen about a 6% pullback on the S&P 500 from its 2009 high. The major indexes could run more as they complete their topping pattern. IBM has already challenged its multi-year high. It seems the S&P is getting ready to challenge the 1101 high. If it spends some time there without breaking through, it would be a great time to open some put positions against these stocks as well as the indexes. Everybody seems to be expecting more of a pullback which tells me we may have still more upside to go. Remember its not how much you make but how much you KEEP that counts in the market. It does not pay to be greedy when you are investing. To take profits now at about 60% would be an above average year and certainly better than the "gurus" who missed this HUGE run in the market!! Stay tuned as the market tends to telegraph the direction it will be taking. We should see more in the coming weeks.

Note: The above is for informational purposes only. Any decision to buy, sell, or hold a specific investment for a portfolio should be discussed with your personal investment advisor.

America's Counter Cultural Revolution

Photo courtesy of Washington archives


As I look back over recent history I see that our country has gone through a Counter-Cultural Revolution of sorts. This is in stark contrast to the culture of forty years ago. During his Inaugural address President John F. Kennedy spoke these words: "Ask not what your country can do for you, ask what you can do for your country." Since then we have turned 180 degrees. The popular belief in this country today is, "What has my country done for me lately?"

The current healthcare debate gives testimony to this.

We are presently debating whether to implement a national health care system. Healthcare is only one of a series of debates we have engaged in recently that are moving our country towards socialism. During the GM bankruptcy hearings we watched as the government disregarded current bankruptcy laws and declared bond investors' holdings secondary to preferred equity holdings. The US government then took majority control of two of the "Big three" auto companies.

When Kennedy took office our nation had started a transition of sorts. The generation known as "the Greatest Generation" grew up in the midst of the Great Depression, was asked to serve in World War II and then Korea, had returned home to enjoy the freedom which they fought for. They served faithfully and selflessly without complaint. As the 1950s drew to a close their offspring grew up enjoying all the luxuries which the most affluent country in the world had to offer. Yet this was not enough.

The 1960s and 70s ushered in an era of unrest. The Baby Boomers became known as the rebels who did not conform to their parents' ideals. Questioning authority was encouraged and even rewarded. As Vietnam rose to the forefront of everyone's lives some served faithfully. Others burned their draftcards or bras, protested, or fled to Canada. The change had begun.

The 1980s saw a rekindling of the conservative spirit under President Reagan. Those who cherished the conservative ideal found their voice. It was a voice which united most of the nation, both conservatives and liberals. This flame was gradually put out by the end of the decade. George H. Bush made it very clear to the Reagan conservatives that they had no place in his administration. Reagan and Bush Sr. were bitter rivals in the 1980 Presidential election and this was not forgotten.

So the 1990s saw the return of a Democratic President who spoke on a platform of "what goes on in our private lives is our own business." But the Reagan economic policies of the 1980s took hold and this country saw a period of unprecedented growth and prosperity. Americans now felt "entitled" to the best of everything. And the Greatest Generation had started to die out.

The new millenium saw the pendulum swing back to moderated conservatism, at least in name. Right now the second President Bush stands out-of-favor with many Americans. But how long will George W. Bush be blamed for our problems? Now only a few of the Greatest Generation remain. Many remaining conservatives are not even sure what they believe and definitely do not have a unifying voice within their own party, let alone the whole country.

The present administration in Washington has given new thrust to outright socialism. President Kennedy's words in 1960 have been replaced with "I want it (blank) now." We just need to fill in the blank for whatever it is we want. National (free) healthcare, jobs, money, etc. Free enterprise and capitalism are touted as our enemies. We are told Socialism and entitlement programs are "good for us." Sadly enough, most Americans have now grown to EXPECT this.

DOW 10,000 Reached

Charts courtesy of www.realtimestockquote.com and www.chartoftheday.com


It ain't over 'til its over. This past week saw the Dow Jones Industrial Average reach and close above the seemingly magical 10,000 level. Only seven months ago this level seemed gone forever with focus on Dow crashing to 5000. Now the "experts" are telling everyone that we should "buy the dips" because this market may move higher. If you are a regular Marketdoc Report reader you (should) have ridden this market to its new 2009 high without much surprise. While the rest of the market "gurus" are looking at lagging indicators like unemployment, we have talked for several MONTHS how this economy is in recovery mode and the market tends to anticipate this.

Make no mistake. Many crosscurrents continue to jostle this market. One of the big "unknowns" has to do with the potential socialization of our health care system. The could have HUGE negative ramifications for the stock market and overall economy as employers may be forced to participate in the "public option." As this debate continues, keep something in mind: Access to a healthcare waiting list is not the same as access to good healthcare! The people who need healthcare the most today (the chronically ill) will be the last ones to receive it under a "public option." The sabre rattling in the Middle East is the other wild card.

Both charts above show there is still some room left to the upside, but not much. Our technical forecast has placed the Dow somewhere near 10,200. As we see more of a topping pattern it will be the perfect place to buy some puts against those positions which have risen skyward since March in order to protect gains. Stay tuned.

Note: The above is for information purposes only. Any decision to buy, sell, or hold a specific investment for a portfilio should be discussed with your own personal investment advisor.

DOW Poised to Move Even Higher

We have now entered the "fall" season which has typically been a difficult time for stocks. Almost everyone has been waiting for "the pullback" because the market has "overextended itself." Why do the experts believe this market is overextended? We have just passed through a highly disconnected time in the market where fundamentals disconnected with overall market performance. Some have argued this was part of the normal and predictable business cycle. (See our Marketdoc Report, "Can You Say Business Cycle" from March 14, 2009) Yes, the argument can be made that this cycle was more severe due to the real estate and financial crises. There is still alot of cash on the sidelines which has to be put to work. The pressure is building for more cash to enter this market.

When I look at the Dow technicals I see the index moving higher. Almost all of the technical indicators show there is still room to the upside rather than a "topping" formation that would typically be seen before an extended pullback. Our Marketdoc technical goal places the Dow somewhere between 10,000 and 10,500. If I had to be more specific I would say 10,200. Sure, I could be wrong. There are still some uncertainties out there, particularly the health care debate. Anything can happen overnight in the Middle East. But technically, I am calling it as I see it. The economy is definitely picking up. A trip to Michigan recently showed some businesses even have "Help Wanted" signs out. GM'supplier Delphi Automotive is exiting bankruptcy after four years. Other companies are reorganizing their debt to avoid bankruptcy. The recovery has been underway. The declining dollar is helping international corporate earnings (for now). Many stocks are still inexpensive. And real estate is making a comeback. The glass is more than "half full" at this point. Typical leaders in an early economic recovery are the financials, transports, and technology.

This viewpoint is definitely not main stream. Most of the experts like to look at lagging indicators, like unemployment, for an idea where we are going. Its like driving your car while looking through the rear view mirror. That's alright. Marketdoc is working on a 53% portfolio return so far this year. We took profits when our return approached 90% last month. Not bad.

Note: The above is for information purposes only. Any decision to buy, sell, or hold a specific investment for a portfolio should be discussed with your own personal investment advisor.

Capitalism: A Love Story- Rated "R" for "Ridiculous"

Photo Source: Starpulse.com


Very seldom do I take the time to write about a movie. But last weekend I had a chance to see Capitalism: A Love Story, the new film by Michael Moore, with my daughter. She thought I might like it because it was "about Wall Street" and it "seemed funny" in the previews. Our other movie choice was to see Zombieland. We both wished we had seen Zombieland. I honestly cannot remember watching a movie that was as bad as Capitalism.

Knowing full well that Moore has made less-than-par movies in the past, I still wanted to give him a chance. The movie starts out with what seems to be a historical comparison between the United States and Ancient Rome. With Moore drawing similarities between both societies and asking the question as to whether we might follow the same path as Ancient Rome. But there is where seemingly factual portrayal ends and fantasy begins. The movie is laced with half-truths and opinions, obviously Moore's own perspectives, sometimes completely false, and downright nauseating.

Moore goes on to talk about how the American people have been brainwashed since the 1950s to believe that capitalism was "good." He then goes on to spend several minutes pointing out how President Ronald Reagan helped us to "feel good" about capitalism and the profit motive without knowing the great evil that was among us. Switching between pictures and images of Presidents Reagan and Bush, Moore inserts interview footage of people who are being evicted from their homes, or other tragic circumstances. Somehow, in Moore's mind, Presidents Reagan and Bush are to blame for this. He spends several minutes developing the idea that capitalism is not biblical and even has a Catholic priest making a statement that "Jesus would not condone capitalism." What bible is he reading from? I cannot find any bible reference that states capitalism is evil. But the nausea continues...

The movie tries to dismantle the idea of capitalism, and the "evil" profit motive, but then uses an example of a successful bread company that is employee-owned. Moore states, "The employees each make over $60,000 which is three times as much as employees of other similar companies." Hello! This is called "free enterprise," i.e. capitalism. And in the employees' own words their incentive is to make a profit-- hence the profit motive! Just a plain contradiction.

He also talks about how the unions have systematically been dismantled and how bank derivative contracts helped cause our financial problems. Here, there is some truth. Apparently, Moore didn't do enough research to realize that more jobs have gone overseas during the 1990s with the implementation of NAFTA and other free trade agreements. The repeal of the Glass-Steagall Act in 1998 allowed banks to trade high levels of deriviatives on their books. Glass-Steagall was put into place in the 1930s after the 1929 stock market crash to prevent banks from being overzealous with derivatives trading, among other risky operations. Both events took place under the Clinton Administration. Oops. Moore must have overlooked these important facts. He doesn't mention these two key facts at all.

And why does he think that just because he shows up at a Fortune 500 company with a camera, he will get invited in to meet with its CEO? When he showed up at GM's headquarters and was not let inside, he made the comment, "What do I need to do to see someone?" Why not pick up the telephone, Michael, and schedule an appointment instead of showing up un-announced? What Hollywood producer would give someone the time of day if they randomly showed up at their office with cameras rolling?

The so-called "fat cats" and "profiteers" on Wall Street are portrayed as enemies of the American people. What Moore doesn't tell us is that his own net worth is somewhere around $50 million. Gee. Doesn't that make him a "fat cat" too? (No reference intended towards his weight.) He would never have achieved this level of wealth by making these 'B' rated movies anywhere else in the world. China or India perhaps? I doubt it. But he does his best to try to convince the audience that he is on "our" side. Moore has a history of associating with leftists and radicals which goes back to his early days working at "Radio Free Flint" (Michigan.) He even tries to suggest that the Constitution describes socialism as our fore-fathers' intended form of government. More half-truth and opinion.

Perhaps the best part of the movie is when he is shown outside of the NYSE asking for some "advice." One Wall Streeter shouts "Don't make any more movies!" I wish Moore would have taken this man's advice.

One thought I had was to show up in Moore's hometown, Flint, with my camera rolling, to ask for my money back. It cost me $17 to see this garbage he calls a movie. Michael, if you are reading this, just send me a money order.

My suggestion if someone wants to see what Moore's socialist agenda would be like when put into practice-- watch Dr. Zhivago-- a timeless classic which portrays socialism as its best (and worst.) In keeping with the Ancient Rome theme at the movie beginning, I give this movie two thumbs down. I would give more thumbs down but I only have two thumbs.

Thoughts about Healthcare "Re-Form"

Photo Source: News-Press.com

Last evening I attended a Health Care Forum which was held by Congressman Connie Mack IV, who serves the 14th Congressional District where I reside in Florida. Congressman Mack put together a panel of five health care experts within the community who presented comments about the current healthcare debate. The panel consisted of: Mayor Jim Humphrey, City of Fort Myers, serving as moderator; Ambassador Al Hoffman Jr; Edward Morton, former CEO of NCH Healthcare System; Jim Nathan, Pres/CEO of Lee Memorial Health System; Robert Sanchez, of the James Madison Institute; and Dr. Allen Weiss, Pres/CEO of NCH Healthcare System. Hundreds were in attendence.

Several good comments were made by the panel and audience. An attempt was made to present the issue in as much of an objective way as possible. Here are some interesting comments which were presented:

- Last year the discussion on whether Congress should approve billions in TARP funds to our financial system generated huge response from the general public from both sides. However, there was almost no response by the general public in 2003 when Congress voted to approve over $1 Trillion of Medicare increases.

- We have seen Medicare costs escalate about 14% since its expansion in 2003.

- Healthcare expenses use about 20% of our country's GDP.

- About 10% of the population incurs 70% of medical expenses in our present system. Most of these expenses are for treatment of chronic illnesses. (Source: New England Journal of Medicine)

- Experts have estimated that Florida alone could save about $6.4 billion by better utilizing the roles of the Primary Care Practitioner and focusing on preventative treatment.

- The current system easily approves spending $250,000 to amputate a diabetic patient's leg but will not spend a few dollars for a brochure to educate the diabetic patient how to better address their lifestyle and treatment of their disease.

- Vision care costs have actually decreased over the years as competition has taken hold between providers.

- Access to a waiting list is not the same as access to healthcare.

- Health Savings Accounts (HSAs) which roll over unused balances each year, combined with a plan that covers catastrophic illness or accident is probably one of the best answers. One panelist stated, "We can roll over our unused cellphone minutes-- we should be able to do the same with our HSAs."

What was clear is that this issue will be solved only when both sides come together to discuss the problem as adults. No name calling, no hurling of insults, no political bashing. Yes, emotions can run high. Our health care problem is serious and the clock is ticking against us. Much is at stake. Our friends in Washington should take note. The sooner we Americans unite and reach a compromise in a partisan manner, the sooner we can solve this problem as a win-win for all of us.

Congratulations Congressman Mack for putting this forum together.
10/3/2009 8:31:37 AM

We Could Move Even Higher...

The fall season is typically a time when we see the market pull back significantly. There are a number of theories and reasons for this which have been expounded upon countless times. It makes for some very interesting reading. The current market surge has seen the most gains in the Dow for the same period of time since the post 1929 crash!! (Source: ChartoftheDay.com) WOW! Many are calling for the current party to come to an end.

Here are a few reasons why we may see the market continue to move forward before any significant pullback:

1. Just about everyone expects some sort of moderate-to-significant correction.

2. There is still a fair amount of cash sitting on the sidelines. The pressure is mounting for these money managers to put their cash to work.

3. Although earnings are still depressed at historical lows, there is plenty of room for upside surprises. The market typically reacts favorably to upside surprises.

4. Inflation is still relatively benign.

5. Our Marketdoc technical indicators place this current run to reach resistance somewhere at the 10,000 to 10,500 level on the Dow. If we break out above our current "wedge" formation we could see more like 10,500.

6. The economy is recovering.. this is called "the Business Cycle."

We have seen some tremendous trading opportunities for 2009! Stay tuned to the Marketdoc Report for continued updates on this historical time to invest in the market.

Note: The above is for information purposes only. Any decision to buy, sell, or hold a specific investment should be discussed with your personal financial advisor.

Economic Recovery Underway... Market Responding

Something interesting I noticed over these past few weeks has been the shift in the position of the "expert" market watchers. Instead of telling investors to "wait for the bottom," they have actually changed their strategy. Now they are telling everyone to "wait for the pullback." If you are a regular Markedoc Report reader the recent market surge should have been no surprise to you. (If you are new to the Marketdoc Report, take a look at our posts going back to February.) Not only did many professional money managers not recognize the makings of this powerful rally, some actually NEED the market to pullback in order to get on board!

Make no mistake about it.. we are in economic recovery. The market has been responding to this over these past four months. Yes, we can debate whether it will be a "V-shaped bottom," or a "U-shaped bottom," consumer driven recovery, yada yada. This really doesn't matter all that much. The reality is that from the Dow's low in March to its intraday high in August, we have seen an impressive 47% return in five short months! The typical early economic recovery will see an average market return of about 36%. The market has reached our Marketdoc Report goal of a 40% retracement from the March low. From a technical standpoint there really is not much resistance until we reach the 10,000 level. A pullback now would actually be a healthy consolidation for the market. We could actually go higher as the now-panic-stricken money managers HAVE TO GET INTO THE MARKET!

Here is a sample of some of Marketdoc's year-to-date returns:

Company/Av.Cost/Current Price/Return%
American Axle $ 1.71 $ 6.67 290%
Bank of America $ 11.69 $ 16.84 44%
Ford $ 3.16 $ 7.65 142%
Fifth Third Bank $ 1.36 $ 10.11 643%
UAL Corp $ 3.60 $ 5.65 56%
YRCW $ 2.36 $ 2.20 - 7%

Average portfolio return 51.41%

It doesn't matter whether this rally is "real" or not. We have seen some excellent trading opportunities this year! Keep an eye on the Transports as this sector should rally strongly in an early economic recovery. We have already seen this to some extent but not all the Transports have participated.

Disclaimer: The above is for information purposes only. Any decision to buy, sell, or hold a specific investment should be reviewed by your personal investment advisor.

My Choice for Corporate Executive of the Year: Allan Mulally, Pres. and CEO, Ford Motor Company

After taking over at the helm of Ford Motor Company in 2006, there was whispering all around Detroit that "nobody wanted the job" because "Ford was in trouble." Allan Mulally was the third choice of then-President William Clay Ford Jr., after Chrysler's Dieter Zetsche and Renault/Nissan's Carlos Ghosn turned down offers. But in three short years Mulally has proven himself capable. He has successfully steered his company through one of the toughest times any corporate executive could face.

Before coming to Ford, Mulally served as President of Boeing Corporation's commercial-airplane business. He played an important part in guiding Boeing through the aftermath of 9/11 which adversely affected the aerospace industry. His transition from Boeing to Ford came just in time to experience one of the worst economic downturns in Ford's 100+ year history.

But Mulally foresaw the coming storm that would rock the U.S. automotive industry to its very foundation.

Acting on his foresight in 2006, he led the effort to borrow $23.6 billion against credit worthy assets, while Ford still had the ability to do so. This move helped stabilize Ford's financial position along with other strategic plans which were initiated. Ford is the only U.S. automaker from the "Big Three" which did not have to take bailout money from the federal government. Both domestic auto rivals GM and Chrysler subsequently had to file for Chapter 11 bankruptcy protection. Mulally was involved with important restructuring of contracts with the United Auto Workers and implementing changes in product development. He took part in the widely publicized hearings in Washington concerning the future of the U.S. auto industry. He also couldn't understand why Ford dropped its once-successful Taurus line of passenger cars. The Taurus has since been reintroduced and is making a comeback as one of the strong product leaders for Ford in 2010.

While rivals GM and Chrysler had to be bailed out by the American taxpayer, Ford is poised to take over as this nation's largest domestic automaker. With Taurus appearing along side such models as the smokin' retro-looking Mustang, the always-in-demand F series pickups, the new Ford Edge/Lincoln Mark X SUV lines, and new smart-car technology, Ford has alot to offer.

Mullaly has shown he has the ability to lead, and adjust to changes in market conditions. That is what a corporate executive is paid to do. Congratulations, Alan. Hats off to you for a job well done.

Disclosure: Marketdoc holds a long position in Ford Motor Company Common Stock.

Dow Breakout.. Reverse Head and Shoulders Formation

As the market continues to surge we have seen an impressive breakout above Dow 9000. This translates into a 43+% return from its March low of 6478 to its close today at 9286. It appears that a Reverse-Head-and-Shoulders pattern is all but complete. This is a bullish sign. A typical end target for this pattern would be the distance between the "neck" and "right shoulder." This puts the Dow somewhere around the 10,200 area. A successful test of the "right shoulder" back down to Dow 8000 would actually be a healthy and very bullish sign. The Reverse-Head-and-Shoulders pattern seems to confirm our previously established target for the Dow Industrials between the 10,000 and 10,500 level.

Don't get sidetracked by the investment "gurus" who are telling you this rally is not for real just because they missed it. There are many pieces of economic data which show we are already in recovery. Stay tuned to the Marketdoc Report and you too can learn how to recognize important market patterns such as these while others are scratching their heads wondering what to do next.

Dow 9000-- For Real!

After considerable debate we have seen the Dow Jones Industrial Average close above 9000. This marks a significant 38.8% return from our March 2009 low. Still no celebrating by the market commentators, however. Why? Because they were telling you to "wait for the bottom" and that this rally "is not for real." I'll take a 30+ percent return in only four short months any time. Who cares if anyone thinks the rally is "for real." We have attained our Marketdoc Report goal of a 40% retracement which we first talked about on March 26th.

There are still alot of questions about this economy... the housing market, commercial real estate, energy, etc. Dow 9000 is an important psychological and technical resistance level. Keep in mind the market tends to move on forward-looking indicators. S&P earnings are at an all-time historical low-- with plenty of room for upside surprises. There are plenty of signals telling us we are already in recovery.

The Bear Trap Strikes... Bulls Rule (for now)!

Just when most investors were calling for a "retest" of the March bottom, the major indices bounced handsomely, with the Dow Jones Industrials putting in a 7.33% return for the week ended July 17th. Once again we are closing in on Dow 9000. If we close with any authority above 8987 (50 day moving average) we should see the next resistance level between 10,000 to 10,500. Quite a stretch from here, but possible from a technical analysis point of view. Stay tuned for more excitement and great trading opportunities!

Beware the Sky is Falling...

When it comes to investing, nobody has a crystal ball. One can take a poll of seven different investment "gurus" and receive seven different answers. There are many different indicators we can look at when trying to determine when to buy or sell. People have looked at earnings reports, business cycle analysis, the weather, candlestick charting, the winner of the last Superbowl, fashion trends, etc, etc. to try and predict where the market is headed. When there are so many possible indicators it means that any specific indicator is not 100% accurate.

One indicator I found to be reliable is a "contrarian investing" technique. What this simply means is that if a large group of people are predicting the market will move in a specific direction, chances are it will move opposite. Just like in the children's fairy tale, Chicken Little went around telling everyone the sky was falling and soon had everyone believing it! We saw this phenomenon in late February of this year. After it broke support at 7500, everyone-and-their-brother was predicting the Dow to CRASH and wind up near the 4000 to 5000 level. It proceeded to rally sharply and put in one of its strongest performances since the 1930s. Most "gurus" were left scratching their heads wondering what happened. They had to scramble to get in on the action. It seems we are seeing this same pattern developing now. I cannot say for sure that this market will not test its March lows sometime this summer. What appears obvious is that more and more people are expecting "the sky to fall."

The above chart illustrates the monthly Dow. As we can see the negative volume is decreasing. Downward momentum seems to be weakening, and there is still an upward trend on the remaining indicators. The activity over these past weeks has been on relatively low volume. This may point to a powerful reversal potentially in the making. The market typically pulls back significantly during the fall months. (there are alot of theories about this which I will not go into here) Can it happen during the summer? Sure, especially if there is an unexpected piece of bad news. We have seen alot of bad news in the market lately, most recently the increasing unemployment number. Remember, unemployment is considered a LAGGING indicator. The market tends to prefer forward looking indicators. Gold and oil, two inflationary indicators, have also pulled back significantly.

Regardless of what school of thought you might follow, 2009 has shown some tremendous trading opportunities. The average post recession return for the market is about 36%. This is much greater than the 12% average annual return in other years. Most would agree this recession has been anything but average.

Dow Hitting Resistance

Over these past few months we have seen the Dow Jones Industrial Average approach the 9000 level since hitting its low of 6478 on March 6th. It set an intra-day high on June 11th just below 8900... pretty close to our target of 9000... and in stark contrast to those who were telling everyone to "wait for the bottom." By any standard this powerful 37% rally was impressive and offered tremendous trading opportunities. The average stock market return for an early economic recovery period like the present is about 36%. We are well within this range.

The past three weeks have shown the Dow trading sideways with some downward momentum. Where is it headed? Unless there is some catastrophic news out there, we should see this sideways pattern continue until the fall season to finish out our top. Markets seldom move straight up or down. Volume can be light during the summer months which can offer some interesting movement, in either direction. Overall the 50 day moving average is at 9045. I expect to see some good trading opportunities over the remainder of the summer as the market, and investors, sort things out with our economy, the bank crisis, world news, etc, etc.

Writer's note: I have been developing a concern that our way of thinking in this country is moving away from the free enterprise and more towards a socialism. We no longer live in an environment where we should 'ask not what our country can do for us' to paraphrase President Kennedy. Now it is more like 'what can my country do for me?' Free enterprise is what has made our country great. If we take away free market incentives, those of us left with jobs will be part of some nameless, faceless beaurocracy that offers no reward for outperformance. I will specifically be focusing on our quest for "National Healthcare Reform" and my concerns if we go to a socialized system. Make no mistake, an 8 hour wait in the Emergency Room will be the norm.. and forget about having that knee or hip replacement done anytime soon. I will write more about this in upcoming Marketdoc Reports. Stay Tuned.

Seems Like '79 All Over Again...

Most people under 40 cannot remember what it was like during 1979. As I read the headlines today, I see a striking similarity to events which took place thirty years ago. As the saying goes, "If history doesn't repeat itself, it sure rhymes." See if you agree:

1. The gold price was on its way to record highs.

2. Demonstrations were taking place in Iran which ended in the overthrow of the Shah.

3. Chrysler was on the verge of bankruptcy. Calls were being made for a government bailout.

4. Oil prices were escalating.

5. The dollar was under seige.

6. Major legislation had been passed which made the old "gas guzzlers" from Detroit out-of-favor and the focus was shifted toward improving fuel efficiency standards and overall vehicle quality.

7. There was an increasing call for development of alternative sources of energy.

8. The economy was in throes of a recession.

Of course, interest rates today are much lower than they were in '79-80. The stock market logged a 27% return from its recessionary low in January 1980 through June 1980. According to JennisonDryden, "the average post-recession return for the stock market S&P 500 is 36%... recession fears and market volatility make investors skittish..with many pulling money out of the market after having experienced much of the decline... Typically stock market declines begin prior to the arrival of a recession and a rebound begins while the recession is still underway."

Note: The above is for informational purposes only. Any decision to buy, sell, or hold a specific investment for a portfolio should be reviewed by your personal financial advisor.

Dow Keeps Gaining

Since hitting its low in March, the Dow Jones Industrial Average has continued to show quite a bit of staying power. We have seen the Dow gain over 35% in three months!! We are on track towards a 40% retracement which would place the Dow somewhere around 9000. The incredible fact remains that there are alot of money managers who still have not entered this market. They are beginning to panic as they sense having missed this record-breaking move upwards. These managers have been looking to get into the market on any sustained pullback but they have been unable. Now things are getting a bit uncomfortable for them!

The weekly Dow continues to climb toward its 50 day moving average at 9129. We hit an intra-day high at 8855 on Friday, June 5th. From here, 9000 seems within close reach. We might even see an advance ABOVE 9000 as these money managers enter the market. THEY WILL HAVE NO CHOICE BUT TO BUY!!! This type of activity could take us well into summer.

Pay no attention to the main stream financial media who are "waiting for the bottom." There are many crosscurrents of information floating around this market. Stay tuned to the Marketdoc Report and you too can learn to recognize these important market patterns.

Please take a moment to reflect on the lives our brave soldiers who fought and died on the Normandy beaches 65 years ago today, June 6, 1944. Remember D-Day. We owe them our freedom!

Note: The above is for informational purposes only. Any decision to buy, sell, or hold a specific investment for a specific portfilio should be reviewed by your financial advisor.

Bank Index Consolidating...

This past week we saw the overall stock market engaged in a see-saw action with no real conviction. Many market watchers are expecting the market to sell off as we get into the summer season. The market has been showing signs of being overbought and has encountered resistance around Dow 8500.

The above chart illustrates what appears to be a consolidation pattern in the Banking Index (BKX). After bottoming in March, and then rising above its 200 day moving average in May, the BKX has been consolidating above its 50 day moving average in an upward trend. If support holds, we could see a much stronger move upward. Typically, the Banking sector will lead the market in an extended move in either direction (whether up, or down).

Remember, strong moves in the market typically are not predicted by most "gurus." During times like these it usually pays to take a contrarian approach opposite to what the herd mentality is thinking. Keep watching the Marketdoc Report for further updates.

Please take a few moments this Memorial Day weekend to remember those who have fallen for our country. They paid the ultimate price for the freedom which you and I enjoy. God Bless America!

Note: The above is for informational purposes only. Any decision to buy, sell, or hold any investment for a specific person or portfolio should be discussed with your financial representative.

S&P Earnings- Plenty of Room for Upside Surprises?

Take a look at the above chart courtesy of Chartoftheday.com. It illustrates the inflation-adjusted earnings of the S&P going back to 1936. We have just witnessed the largest decline of S&P inflation-adjusted earnings on record. This amounts to about a 90% decline in earnings over a 20 month period. What does this mean? The market seems to have been rallying in expectation of upside surprises. Can earnings drop even lower? This is certainly possible. But, remember, even a limbo contest must end sometime. We seem to be very close to "how-low-can-you-go" earnings. Many market watchers are still predicting the worst is yet to come. Maybe so. Most investors usually get caught behind the curve and miss some great investing opportunities. This is certainly worth noting. Stay tuned.

Dow Continues to Climb

Since hitting its low on March 6th, the Dow Jones Industrial Average has put in an impressive 32% return. The above graph illustrates the intensity of the Dow's breakout of its descending wedge pattern over the last eight weeks. Many were calling for a total breakdown to the 5000 level, or at minimum, a retest of lows. These "gurus" actually MISSED this huge rally! Many of the big money managers were scrambling to "get in on the action." Some were still heavily positioned in cash into the second quarter of this year and are only now getting back into equities.

The recent announcement of the "favorable" bank stress test results this week added some momentum to this market climb. Now many of the economic indicators are actually showing an end to "The Great Recession of '08" sometime before the end of 2009. Further it seems that the declared bankruptcy of Chrysler and possibly GM has already been factored into the market. We have definitely shifted away from a "fear mentality." The market is now looking ahead toward post-recession earnings. There are still some great stock buys out there!!!

Don't be fooled by the seemingly Alice-in-Wonderland, topsy-turvy nature of this market where up-is-down, and down-is-up. The market has telegraphed many technical signs as to where it is going. The challenge is to filter out all of the daily "noise." With its latest advance the market is moving toward the 9000 level-- this would be a conservative 40% retracement from its last leg downward. There is an intermediate moving average line at 9242 which should provide some heavy resistance on upward momentum.

This has been a great opportunity to book solid profits for 2009! Stay tuned to the Marketdoc Report for the latest news and market updates.

Note: The above is for information purposes only. Any decision to buy, sell, or hold any specific investment for a person or portfolio should be reviewed by your personal investment professional.

Will Dow Retest March Lows?

There is an old saying "anything's possible." That is just what has left most money managers and private investors scratching their heads. Since hitting its low on March 6th the Dow has turned in an impressive 25+ percent return-- about two-years- worth of returns- in six weeks! What I find very interesting is that most investors missed this huge move upwards because they were "waiting for the bottom." The Marketdoc Report has talked about this move since February 23rd.

There is no doubt the market now is showing signs of being short-term overbought. The real question remains as to whether it will retest its lows or continue upward after a short consolidation. Lets look at some factors which might affect a move in either direction:

1. The market is looking for STABILITY with regards to our banking system. It wants some assurances that we are not facing an economic doomsday scenario. We have seen some change in sentiment recently that a meltdown is not imminent. Today the market reacted negatively toward the news about which banks may or may not pass their "stress tests." This is utter nonsense. Why? Because banks have already started showing profitability in the first quarter 2009 when we are still in a recession. The concern has always been about the ability of banks to lend against their capital base due to the so-called "toxic asset problem." Many argue this problem was created when FASB made banks change to mark-to-market accounting of its assets. The banking problem is about CAPITAL STRUCTURE and lending practices, not that there are no loans out there to be made. For this reason, I believe all the political posturing and rhetoric in Washington is just that-- posturing and rhetoric. Washington has actually contributed to the problem by implementing RETROACTIVE conditions of its TARP funding. Some banks want to repay TARP funds but can't. That is why there is still uncertainty regarding this problem. The "toxic asset problem" will slowly be resolved as the real estate market makes a comeback as we are already seeing in many parts of the country.

2. The Fed's expansionary monetary policy should give a jolt to the economy (some argue this is not necessary) but may have long term ramifications as all this liquidity makes its way through the system. It will also weaken the balance sheet at the Fed.

3. After breaking out of its descending wedge formation, the Dow has placed its best week-to-week performance in 70 years. It will take alot of momentum to reverse its current trend. Something on the lines of a terrorist attack or nationalization of banks would do it. But I dare say even Washington sees that it is a bad idea to nationalize our banking system. A typical retracement when we see a reversal like this would be about 40%. This would place the Dow somewhere around the 9000 level.

4. The monthly Dow chart is showing bullish "crossover" signals at several technical indicators such as price rate of change and stochastics. There is decreasing negative volume as well.

5. The market tends to precede the overall economy by about six months. The Fed is even now predicting that the recession will end in either the third or fourth quarters of 2009. This further adds credibility that the market will continue higher.

6. There is an old saying "sell in May, go away." If our pattern holds correct we could reach an intermediate term high in May. This is a potential negative and we could retest the March lows if we flounder around the 8000 level without moving higher.

Could all of this be wrong? Of course. These are merely a few technical and subjective ideas which can have some influence on which way the market will go. For the record, I expect the market to move higher at least through the end of April. At minimum, we are seeing the best buying opportunity in about 10 years! Could we see the best buying opportunity in 20 years? Sure. Only time will tell!

Note: The above commentary is for information purposes only. Any decisions to buy, sell, or hold a specific investment in a portfolio should be discussed with your personal investment advisor.

Have a Happy and Blessed Easter!

I want to wish all of my readers a Happy and Blessed Easter. Let us not forget that Jesus paid the ultimate price by giving His life for us so that we might live. The Jewish prophet Isaiah wrote in about 700 B.C.:

"But it was for our sins He was wounded, and for our evil doings He was crushed: He took the punishment by which we have peace, and by His wounds we are made well."
- Isaiah 53:5

Jesus truly brought peace between mankind and our Creator God. He paid the price for this fallen world we live in, so that we do not have to. All you need to do is accept this gift. Freely. No conditions. I encourage you to do it today if you have not already done so. And thereby share in the miracle of His resurrection. Happy Easter everyone.

Dow Posts Best Gain Since '33

The major headline hitting the press this weekend speaks for itself. From its low of 6470 on March 6th, the Dow has gained about 23.4%, making it the blue-chip indicator's best four-week run since May 1933, when it gained 31%. The Dow's "Bullish Wedge" pattern was first discussed here in the Marketdoc Report on February 23.

Inside of five weeks the Dow has gained over two-years worth of average return-- and most investors missed it!

Are "Happy Days Here Again" as the popular song from Franklin D. Roosevelt's 1932 Presidential campaign suggests? I expect this pattern to continue to about a 40% retracement. This puts the Dow somewhere at the 9000 level. Could we go lower? Yes, but I don't think we will. We may see some consolidation along the way. Aside from an unexpected terrorist attack or something similarly catastrophic, there are too many forces building for an upside case. Between the positive economic numbers we are starting to see (before Washington's stimulus has even begun to work) and the excellent appearance on the world stage this week by President Obama which gave world leaders some reassurance (we can debate over substance but this fact remains) and, lastly, there are alot of money managers out there who missed this HUGE move upwards and they want to get in on the action. Imagine being a money manager of hundreds of millions and you MISSED the biggest gain in the market since 1933!

What an impressive week!

Note: The above is for information purposes only. For specific decisions to buy, sell, or hold investments for a specific person or portfolio you must consult your personal financial advisor.

FLASH: Upside Resolution

I am writing a special FLASH Marketdoc Report tonight to illustrate that our Bullish Descending Wedge Pattern has officially resolved to the upside. Is it possible for us to test the bottom again? Sure. However, I expect the pattern to continue to about a 40% retracement. This would place the Dow somewhere around 9000 before we see a significant change in pattern. Take a look at my previous posts and you too can learn how to recognize this important technical pattern! Keep posted to this blog for further updates and market information.

Note: The above report is for information purposes only. For specific decisions to buy, sell, or hold positions in any specific portfolio you must first consult your personal financial advisor.

Market Pattern Continues

For the past few weeks I have illustrated a pattern in the Dow Jones Industrial Average which I believe is a Bullish Descending Wedge formation. As expected the Dow rallied strongly off its low in the 6400 range to over 7500. Over 1100 points, when almost everyone said it would collapse. Strong rallies such as this are typical of rallies during a bear market. These are great opportunities to capture profit at a time when others are panicking. As you can see by the chart we are still in what I believe is the Descending Wedge formation. I expect this pattern to resolve to the upside. There are many reasons for this, mainly because almost no one expects a large upside move, but also because we are seeing signs that economic data is improving in real estate, retail sales, dry goods, etc. Also, from a subjective standpoint, and from following the market for years, "the market just doesn't crash in the Spring." (If this were the fall season I would tell you differently.) Regardless of the reasons, we are looking at what I believe is the best buying opportunity for stocks in over 15 years. There is always the chance that Washington will do something stupid like nationalize the banks, but (I dare say) even they would not make such a misguided move! The opportunities are there to buy some great name companies at bargain basement prices.

Note: The above information is for information purposes only and is not intended as specific investment advice for any person or portfolio. For decisions to buy, sell, or hold any investment, you must consult your own personal financial advisor.

Can You Say "Business Cycle?"

It seems alot of people have forgotten that there is a predictable business cycle for all of the world's modern economies. The above is a good graphic from Fidelity's website which illustrates which stocks will perform well at different points of the business and economic cycle. Read carefully. Don't listen to those "gurus" who are telling you to "wait for the bottom." Where were they last October? With some good information and common sense you can outperform the herd mentality which right now is in a state of panic.

Note: The above information is not intended as specific investment advice for any particular person or portfolio. For a decision to buy, sell, or hold, you must consult your own financial advisor.

Beware of the Bear Trap!!

Last week I wrote about the possible development of a "Bullish" Descending Wedge pattern in the making for the Dow Jones Industrial Average. Since then, we have seen continued selling and a steepening of the top line on the wedge pattern. This present pattern is currently unsustainable. There is absolutely no good news out there... at least that anyone is reporting on. Furthermore, we have actually seen an increase to the negative volume, but not to the point seen in November. Will the market crash? Maybe, but I don't think so. Everybody is calling for the market to go much lower. Where were these "gurus" last October? I may be wrong, but I think we have the makings of a HUGE bear trap. It is estimated there is about $4 trillion in cash on the sidelines waiting to be put to work. I expect we will see some form of resolution within the next two or three weeks... Stay tuned.

Note: The above comments are not intended as specific investment advice to any particular person or portfolio. For questions regarding a specific investment decision to buy, sell, or hold, please consult your personal financial professional.

Bullish Descending Wedge Formation?

Here is an illustration of what may be a potentially "bullish" development in the Dow Jones Industrial Average. The weekly chart shows what I think may be a descending wedge formation. This is occurring at a time when there is absolutely no "good" news being reported about our economy. Selling activity appears to have reached a point of extreme as shown by the Williams %R and MACD indicators, on decreasing negative volume. Everyone and their brother is calling for a breakdown to about the 5000-6000 level. If this pattern confirms and resolves to the upside, we could see the Dow rally back to above the 9000 level (40% retracement).

Does this mean our problems are over? Not necessarily, but from a technical perspective these are signs of which we should take note.

Disclaimer: The above information is not intended as investment advice. For specific investment advice consult your own financial professional.

Should U.S. Follow Suit with British Bank Deal?

Here is an interesting excerpt from the Dow Jones Newswire. The UK has its own idea of how to solve their banking problem:


(Dow Jones) Feb 22, 2009, Royal Bk Scotland,Lloyds Banking In GBP500B UK Gov Deal-Paper

"Royal Bank of Scotland Group PLC (RBS) and Lloyds Banking Group PLC (LYG) have submitted plans to insure almost GBP500 billion of assets as part of the U.K. Treasury's scheme to kick-start lending, the Sunday Telegraph reports.
Prime Minister Gordon Brown and Chancellor Alistair Darling will meet with Treasury advisers later Sunday to hammer out details of the program, which will involve the creation of a new class of non-voting shares to allow the banks to fund their participation, the newspaper reports...

The newspaper cited people close to the discussions saying that it would see a new type of capital instrument devised that includes a dividend entitlement. However, because the new shares would not include voting rights, their issuance would not be dilutive to existing shareholders...

The solution avoids the immediate prospect of outright nationalization for the two banks, which are both likely to be charged billions of pounds for their participation in the Treasury scheme, the newspaper said."

Could this be the answer Wall Street is looking for?

This Is Not Your Grandfather's Depression...Yet

This past week, several pieces of data came on the newswire which show we might not be headed for the Great Depression II. Whether or not you agree, it can be said that the U.S. Consumer plays a significant role in how deeply this recession will affect the global economy. That is why these retail data are so important:

1. Sales at U.S. retailers unexpectedly halted a six-month slide in January.

2. Sales at automobile dealerships and parts stores rose 1.6 percent, the first gain since August, after decreasing 2 percent.

3. Excluding autos, gasoline and building materials, the retail group the government uses to calculate gross domestic product figures for consumer spending, sales rose 1.2 percent in January, following a 1.7 percent decrease in December. Sales also rose for electronics, appliances, clothing and food and beverages.

4. Purchases at non-store retailers, which include online and catalog sales, rose 2.7 percent.

5. The inventory of existing homes for sale in 29 major markets covered by an independent research firm declined an average of 2.5 percent in January 2009, compared to December 2008 and down 13 percent compared to January 2008. For the housing market to recover, less inventory is good.

Maybe this is looking at the glass "half full." But definitely, this is positive news. All this comes as Washington continues to push for a whopper stimulus spending bill which everyone agrees is not perfect and will take years to see the full benefit.