Looking cautiously forward (a bit)

Last week's market action was good .... for me .... and for lots of others. Those that chased the financials out the gate on Monday certainly had their risks rewarded. But the bigger picture? Still lots of areas that need reconciliation, right sizing and a correction to capacity and production in align with changes in consumption. Meredith Whitney talked about CC defaults. The CRE market has not completed failed. Neither have corporate earning drops been fully realized. Talk still remains about further devaluations in residential real estate. So how will this translate into market action next week? Many have a positive view at this time.

From Words from the (investment) wise for the week that was (March 9 – 15, 2009) "The stock market “internals”, or market breadth, like the up/down volume spread, the advance/decline spread and new highs/lows have improved dramatically over the past few days and auger well for the nascent rally. Yet, the market still needs to do a considerable amount of work before evidence of a primary bear market low will be demonstrated. As a first step, the indices must clear their respective 50-day moving averages, i.e. the S&P 500 and Dow Industrials need to rise by 7.4% and 8.3% respectively."

From Dow Theory Letters “So where are we now? Over the last few weeks the market has become drastically oversold - at the same time investors’ sentiment has grown progressively more bearish. Furthermore, since September 2008 we have experienced an amazing twenty-one 90% down-days, which may have exhausted the urge by big investors to sell. “By the way, yesterday [Thursday] was a 90% up-day, the second of this week. This action strengthens the thesis that this advance has further to go."

From TraderFeed (Sector Update for March 15th ) "MATERIALS: +100 (66%)INDUSTRIAL: +80 (33%)CONSUMER DISCRETIONARY: +100 (76%)CONSUMER STAPLES: +80 (60%)ENERGY: +20 (58%)HEALTH CARE: +80 (48%)FINANCIAL: +140 (73%)TECHNOLOGY: +140 (78%) where Technical Strength (a quantification of short-term trending) varies from -500 (strong downtrend) to +500 (strong uptrend), with values between -100 and +100 suggesting no significant trend." Although positive reversals are present, the rally last week has only been sufficient to move the sectors to neutral status in Technical Strength. It is suggested here and elsewhere that last week's rally could be explained solely from short covering.

From SeekingAlpha (It's a Winter Warming Spell - But More Snow Ahead for Markets) P/E and forward P/E are still too high, and references to S&P500 at 600 are reiterated. Dividends cuts. Revenue down. Global GDP still faltering. Real Estate deflation continues unabated. There's more, but the thread is generally negative to neutral on a wide variety of indicators.