Where's the Beef?
The market finished the quarter with its biggest gain of the decade, but ended with many prognosticator's wondering, 'where's the beef?'. The S&P 500 closed the quarter with a gain of 15.37%, and now stand at a positive 4.36% for the year; our results are currently posted on our performance page. With the market up almost forty percent from its March lows, it is interesting to note that buying pressure is now back to those lows, and selling pressure has increased to where it was two weeks after the surge (source Lowry). While June and July of '03 saw a similar buying pressure pattern, the market was able to continue its rally back then, as selling pressure had completely exhausted itself; not the situation today. On a positive note, inflationary worries have been put on the back burner, and for those who believe in the expression: 'don't fight the Fed', monetary ease will be with us for the foreseeable future.
It is my belief that we are finally in a correction that will last longer than the two day variety seen since the March 9th lows, and perhaps the only question is how far will it go. A fifty percent correction would take us back to the 815 level in the S&P 500, and if that level can hold, a rally above the recent highs in either the Dow or Dow transports (according to Dow theory) would indicate a new bull market. In the event the market correction should carry below the March lows, we've extended the hedges (where applicable) through September. Hoping for a mild but healthy correction.
-Joe