An tSionna 4.5.09 Taking Stock.

I'm back and taking stock of the market after being gone for most of last week. Lots of good things are happening under the surface with the market right now. While it is to soon to say that the bear market is definitely over, I'm beginning to think that it is. I am in the camp of others such as Doug Kass who thinks we have seen the lows for this cycle. Kass goes so far as to say that he thinks we've seen generational lows. {See Seven Thoughts Of Doug Kass: http://lumencapital.blogspot.com/2009/03/seven-thoughts-from-doug-kass.html}

1. The first thing I look at is the most recent price action. Here we can see a market that has been in the process of consolidating its price move off of its March 10 lows. It has regained the secular lows of the past bear market {horizontal red Line} which had the potential of becoming overhead resistance {a barrier for upward price movement) and is trading above it's 50 day moving average {dark green line}. It is also trading above the downward sloping trendlines it established respectively back in the spring and summer of last year. While some end of the month window dressing might be involved in last week's trading, the whole tone of prices and market movements sure feels more positive right now.

2. We are also in the process of forming an upward sloping trend line {pink dotted line}. This is also a necessary precursor for upward price movement longer term. I say in the process of forming such a line because we need three data points for reference and right now we really only have two. Again this is a potentially positive development.

3. One slight negative that might lead to some short term selling is that many of the indicators we follow such as this Relative Market Strength indicator are registering short-term oversold. This means there is the potential for a shorter term correction in the next week to ten days. While nothing is certain the probability is higher right now that this could occur. A small retracement into profit taking would actually be healthy for the market about now.

4. The final interesting point is that for all of our price movements over the past 6 months we are now higher than the lows tested back last November and have formed one massive trading range between roughly 660-960 on the S&P 500. That is one volatile trading range! IT is in keeping with the spike of volatility that we've seen during this troubling time. That may be with us for some time and may become a fact of life given how stocks trade at this time.

At any rate a better feel. I expect some short term weakness coming but other than that I think stocks are in for generally a more positive period going forward unless something comes along that we are currently not looking out for.

*Long ETF's related to the S&P 500.