The Stock Market Continues to Climb
Apr 13, 2009
Posted by Jody Eisenman | Filed under Uncategorized
Despite the dreary economy, the market continued its’ rally last week with a very strong close into the weekend. Buoyed by positive news from Wells Fargo, the financials led the entire market higher. The Dow now sits at 8083, which is its’ highest close since February 9, or about 2 months ago.
Here are the respective closes for the DJIA on the 9th day of the last few months:
Date DJIA Close
01/09 8599
02/09 8271
03/09 6547
04/09 8083
The S & P 500 closed above the important technical level of 850. Both 800 and 850 were important levels to be overcome. I view 900 as the ultimate test. Although the market looks incredibly strong here, logic tells me that 900 will be tough to overcome, at least now. I would expect that if we get that high, we will have a pullback to at least the 800-850 area. Of course, any economic news such as unemployment, the bank stress tests and the possible (if not probable) auto bankruptcies could have major effects in the trading markets. For right now, though, the bulls finally seem in control.
Several stocks broke out of their trading ranges last week as well. Some of the most prominent names include Alcoa, Bank of America, Wells Fargo and American Express. This did not surprise me. It was too easy to make money on the downside for so long. What inevitably happens is that the weakest stocks (which tend to be the most heavily shorted) usually have the largest gains when the market turns. Short sellers begin to panic, and their buying spurs stocks higher. I believe you are have been seeing this for the last 5 weeks, but it seems to have accelerated Thursday. I would have two cautionary notes. First, the credit markets remain tight. If these markets do not open in a meaningful way, I can’t see the market continuing to rally much longer. Second, the federal deficit continues to explode. Remember, when you borrow money, sooner or later you have to pay it back.
