Monday Morning Market Review: 2007-10-08

Scoreboard

INDEX	10/5/07 CLOSE	ALL TIME HIGH	% CHANGE YTD	% CHANGE 52 WEEK
S&P 500	1557.59	1557.59 (10/5/07)	9.8%	15.4%
Dow Jones Industrial Average	14066.01	14087.55 (10/1/07)	12.9%	18.7%

INDEX	P/E TRAILING	P/E FORWARD	DIVIDEND YIELD
S&P 500	18.1	16.6	1.8%
Dow Jones Industrial Average	16.9	16.1	2.1%

Trend Analysis

Trend ***	S&P 500	DJIA
Primary (200 day MA)	Up	Up
Intermediate (50 day MA)	Up	Up
Short-term (10 day MA)	Up	Up

(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend

*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.

Richard Russell’s PTI

Russell’s PTI is Bullish

Facts & Interesting Tidbits

• The DJIA is up 9.5% from its mid-August low.
• The DJIA was up 1.2% for the week, its fourth straight weekly gain.
• The DJIA reached a new record close of 14087.55 on Monday.
• The DJIA hit a new intraday high of 14124.54 on Friday.
• The S&P 500 closed at a record high on Friday.
• Volatility has increased - between July 19 and late September, roughly half the trading sessions freatured swings in the S&P 500 of at least 1%. By contrast, in all of 2005 and 2006 combined there were less than 60 trading days in which prices moved more than 1%. (Source: Wall Street Journal)

The Bottom Line

Markets hit record highs last week as investors hope the worst is over. A positive employment report drove the market higher on Friday. The market continues its bullish trend. The Dow continues to lead the way as investors are favoring large multi-national businesses.

Monday Morning Market Review

Scoreboard

Trend Analysis

S&P 500
Primary Trend = UP
Intermediate Trend = UP
Short-term Trend = UP

NOTE: I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.

Richard Russell’s PTI = BULLISH

Facts & Interesting Items
· U.S. Stocks Have Biggest September Gain Since 1998 on Rate Cut
· The S&P 500 gained for the 5th straight quarter

The Bottom Line
The Fed helped stocks with a .50% rate cut in September. Since then, stocks have clearly been trending up. How will Q4 unfold? I only wish I knew! However, at the moment the market is clearly in a bullish trend and this market is favoring the large cap blue chip stocks. The DJIA is only 0.7% below its record close of 14000.41 set on July 19th. This should be an interesting week as we watch and see if the DJIA will break through and hold above the 14000 level.

Links for 2007-10-01: Dow Hits New High

U.S. Stocks Rally, Sending Dow Average to Record (Bloomberg):

• U.S. stocks rallied, sending the Dow Jones Industrial Average to a record, as investors speculated the worst may be over for banks and construction companies hurt by subprime mortgage losses.
• The Dow's record caps a six-week recovery from a slump that helped wipe out almost $2 trillion in U.S. market value. The 30- stock gauge added 191.92, or 1.4 percent, to 14,087.55, above its previous closing high of 14,000.41 set on July 19.
• The Standard & Poor's 500 Index increased 20.29, or 1.3 percent, to 1,547.04, 0.4 percent shy of a record.
• The Nasdaq Composite Index gained 39.49, or 1.5 percent, to 2,740.99, the highest in six years.

David Gaffen @ MarketBeat: It’s often helpful, in times like this, to look at what speculators are doing, as extreme positions taken by maddened crowds generally serve as nice indicators of exactly what not to do, and with that, there’s a bit of contradictory evidence at this moment. Small traders, which normally includes retail investors, turned bearish this past week, going short S&P 500 futures by about 25,000 contracts, for the first time since March 20. Schaeffer’s Investment Research analysts note that small traders turning bearish has proven to be a bullish signal, with average returns of 3.5% in the S&P 500 for the next 20 trading days.

Comments

Go back 4 to 6 weeks ago... If you were listening to the media you would have thought we were months or years away from new highs in the stock market. What happened to all of the concerns related to the housing market, the slowdown in consumer spending, and reduced corporate spending? I guess the market just doesn't care about all the doom and gloom predictions in the financial media. What is the action of the market telling us? When in doubt, follow the trend! In spite of the negative news (dollar reaches new low, housing situation, oil at new highs, etc.) the market keeps climbing.

In his latest newsletter John Mauldin looks at whether it is possible for the US economy to be in a recesion while the US stock market continues to rise. John's letter points out that the market's rise this year has been dominated by the more global sectors which consist of the large multi-national businesses. Many of these companies make more than 50% of their earnings outside the US and the global economy is doing well. This provides some insight into why the market continues to rise in the midst of so much negative news.

Jim Cramer on why the worst is yet to come...

Jim Cramer provides a simple explanation of the subprime-lending crisis in New York Magazine. Check out Mr. Cramer's article, Bloody and Bloodier, to read why he thinks the subprime-lending crisis is worse than you think, and could crush financial and real-estate markets for years.

Disclaimers

GENERAL SITE USE DISCLAIMERS

Adam Zuercher is the Chief Investment Officer of Freedom Financial Solutions, LLC, a Registered Investment Adviser. The opinions expressed in this blog are solely the opinions of Mr. Zuercher. The opinions listed on this blog are for informational and educational purpose only. You should do your own research before making any investment decisions. This blog, its affiliates, partners or authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.

This site has been designed for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any product or service which may be referenced. However, several links to the Freedom Financial Solutions, LLC website are found on this site and Freedom Financial Solutions, LLC provides investment management services. Mr. Zuercher does not intend to provide investment advice through this site and does not represent that the securities or services discussed are suitable for any investor. Investors are advised not to rely on any information contained in the site in the process of making a fully informed investment decision.

Some information found on this site was gathered from sources that are believed to be reliable but Mr. Zuercher has not validated all of the content. While Adam Zuercher will seek to provide accurate and timely information, and rely on sources believed to be reliable, the site may include inadvertent technical or factual inaccuracies. Adam Zuercher does not warrant the accuracy or completeness of the materials provided, either expressly or impliedly, and expressly disclaims any warranties or merchantability or fitness for a particular purpose.

Decisions based on information contained on this site are the sole responsibility of the user, and in exchange for using this site, you agree to hold Adam Zuercher and his affiliates harmless against any claims for damages arising from any decision you make based on such information.

Neither Adam Zuercher nor any related parties will be liable or have any responsibility for any loss or damage that you incur in the event of any failure or interruptions of this site, or resulting from the act or omission of any other party involved in making this site or the data contained in it available, or from any other cause relating to your access to, inability to access, or use of the site or these materials.

Adam Zuercher reserves the right to withdraw or prohibit access to the site, and to revise the software, materials, information and the services and products described in this site, at any time without notifying users.

GENERAL PRODUCT/PERFORMANCE DISCLAIMERS

Nothing else contained on this site should be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security. Nor is it intended as investment, tax, financial or legal advice. Investors should seek such professional advice for their particular situation.

This site is published in the United States for residents of the United States. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Nothing on this site should be considered a solicitation to buy or an offer to sell shares of any investment in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction. U.S. investors are advised that not all investments described on this site are available for sale in all states.

Performance information presented on this web site is historical, and is not indicative of future results. Investment returns and principal may vary, and at the time of sale, your investment may be worth more or less than its original cost. It is possible to lose money by investing in securities mentioned on this site.