General Market Comment: July 20, 2009
I am presently nearing completion on a comprehensive market and economic chart stack and consequently I am abbreviating the usual market comment this week.
The earnings season has not disappointed so far and the economic indicators continue to suggest the recovery is under way. There is plenty for fundamental analysts and technical analysts to like about the state of the market. One technical development has been the rising 50 day moving average for the S&P 500, the Dow and the NASDAQ up through their respective 200 day moving price averages. This pattern is known as a “golden cross”. Birinyi Associates tells us the occurrence where the 50 day average rises while the 200 day price average is falling has only occurred 12 times in the S&P 500 since 1947. The market has gone on to rise over the ensuing 6 and 12 months in 11 of the 12 occurrences. I like those odds.
The elevated debate regarding “Obamacare” is beginning to give the market some hope that the legislation and its associated massive tax increase will be voted down or at least stalled going into the August Congressional recess. Should either outcome occur we should expect a strong market rally.