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.