The Market, The Economy and Tea Parties

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Dear Toolbox Readers,

Wow! What a recovery!

Maybe you have not noticed… but the market has been rockin’. Is this the beginning of a new bull market? Could it be true that the bailouts are working? Is it possible that more government spending is really the answer?

Not so fast… lets’ take a deep look.

If you happened to be savvy enough to hop into this market 6 weeks ago when it was dramatically oversold. You were one smart cookie and probably watching our Sunday night show. But should you continue to be bullish on this market from here?

Since the lows the DOW is up about 26% and the S&P is up about 30%. The NASDAQ is up even more. Even so… only the NASDAQ is up so far on a YTD basis

This is classic bear market rally material. I am still a little concerned. There is another HUGE wave of mortgage resets coming starting in May.

The second largest mall operator declared bankruptcy this week. There are more job losses on the horizon and by the time we work through all that… There is no doubt that inflation will be back with a vengeance and destroy the buying power of what little money people have left.

73% of the NASDAQ 100 stocks are up on a YTD basis, but only 26% of DOW 30 stocks are up for the year.

The market has not moved so far.. so fast in about 70 years.

Look closely at the table below… last month, only 12% of stocks were trading above their own 200 day moving average… now it’s almost 33%.

	Percentage of Stocks Above Moving Average
Market Momentum	20-Day MA	50-Day MA	100-Day MA	150-Day MA	200-Day MA
Today	86.54%	88.98%	77.24%	56.95%	32.86%
Yesterday	86.17%	87.67%	76.05%	53.89%	30.90%
Last Week	89.00%	84.12%	71.33%	46.25%	26.39%
Last Month	83.13%	41.57%	38.21%	19.33%	12.00%

Look also at the 50day moving average column. Last month, 41%… this month almost 89% of stocks are above the 50 day. That is a huge move.

I think there is no question that the S&P is pushing the limits of a short-term bull run with 6 up weeks in a row. But the weekly chart is closed right up against the 30 week moving average so we could have seen the last week in this historic streak.

The stochastic’s are also pushing into overbought territory and so we get another indication that this rally is due for a pullback.

Looking at the daily chart on the S&P I see that the market has been in overbought territory for a few weeks, the table above will show that more than 80% of stocks have been above their own 20 day moving average for over a month.

This is the time to be very careful about new positions to the long side, and be sure to have stops under any open positions.

For more information and a closer look… come to the show Sunday night at 8pm Eastern time.

There are lots of reasons to be hopeful… and just as many reasons to be cautious. One of the things that makes me hopeful is the American people pouring into the streets to have “tea parties”.

Rarely have I seen something so “overblown” in my life.

The liberal TV networks tried to cover it as some kind of “right wing” fake protest… The coverage on MSNBC was nothing short of tasteless and insulting to any American.

The coverage on CNN was equally dishonest and rude, but not quite as bad as the NBC family of channels… Even Jon Stewart took a few shots at the protestors.

Fox News covered the tea parties like they invented them… HA!

I have news for all the so-called “news” networks.

The tea parties are about the same thing they have always been about… Popular resistance to an oppressive government.

Taxation without representation, plain and simple.

What’s that you say…we have representation… oh really?

Are the un-born who will pay the tab for all this spending being represented? I didn’t think so.

This is not about right vs left… It’s about right vs wrong.

It is un-American to tax people who get no vote! My son is 11, he doesn’t get to vote, but he will be paying YOUR tab for all this ridiculous spending.

I for one will not be silent about this incredible form of fiscal child abuse. It’s about the children.

I fear that we will go down in history as America’s worst generation for allowing this to continue.

Even before the record amounts of government spending we were already 10 TRILLION dollars in debt.

Don’t you think that if government spending was the answer… we should be living in economic nirvana by now?

As a clear indication that more tea parties are needed…

Literally hundreds of thousands of people pour into the streets demanding the the government hear their voices and White house Spokesmen Gibbs said… “The President is unaware of the tea parties.”

Seriously?

So let me get this straight… people are angry that the government does not hear them and the President is… “unaware”.

That explains a lot!

Do you have something to say about the tea parties? Send your thoughts to radio@markettoolbox.com

Unlike the President, we would love to hear what you have to say.

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Until Next Time…

Best Wishes and Good Investing,
Bill McKinley & Doug Newberry

The Investing Systems Network

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