A Premarket Thought

Yesterday gave us an investment trifecta: Apple announced its Ipad, the Federal Reserve announced its policy going forward on interest rates and the President delivered his State of the Union Address. At least in the short run I think all three are slightly market positive.

-President Obama seemed have read the electorial winds and moved slightly towards the political center. That at least seems to be what the opinion shapers are saying this morning. For the moment (pre-market as futures are higher this morning) markets are interpreting this as a positive.

-The Fed's statement yesterday afternoon showed almost no change from its past announcements. Markets seem to be interpreting this today that the very low interest rates we've seen most of the past year will remain in place at least through the summer.

-Ipad introduced by Apple yesterday I think will provide enough of a "wow" factor to help tech stocks at least in the short term.

Add to this a market that on a very short term basis has become somewhat oversold and you have the recipe for some sort of bounce in stock prices over the next several days. Again, remember if we are experiencing a change of trend then it will likely show itself in the nature of any rally we see in the next week to 10 days. A weak rally that either falters after a couple of days or fails decisively at the overhead resistance we've highlighted this month would be indicative in the least of a range bound market and on a more negative basis a market that wants to move lower.

On the other side a market that moves higher through resistance would be indicative of a market that has simply paused in its rally similar to what we've seen several times since the market bottomed out last March. We of course have no way of knowing what way we'll go. We've become more defensive in our tactical orientation this past month. In some accounts based on their own risk/reward criteria that thinking has caused us to raise a slight amount of cash. That however should not be interpreted as us becoming bearish overall on the markets for this year.

As I've stated before I think stocks have the potential to trade between 1,250-1,350 on the S&P 500 by year end. But one of our overriding disciplines is the study of money flows and those have turned slightly negative since mid-month. We have to follow their lead as part of the game plan. That same money flow analysis will be our guide as we go forward into this year. In other words we're going to listen to the market and let it give us our clues on what to do whether we go higher or lower from here.

*Long Apple Computer in several client accounts as legacy positions. Long ETFs related to the S&P 500 in certain client accounts.