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.