Stock Preacher

For some US stock analysts, yours truly among them, the start of the 1980’s Bull Market is a fitting historical precedent these days rather than the Great Depression era of the 30’s.

When comparing the the S&P 500’s chart in the advance since March 9, when it fell to its lowest level in 12 yrs, the recovery from a two year low set on Aug. 12, 1982 look very similar.

The S&P 500 rose 15% for all of 1982 and moved higher every year for the rest of the decade.

“Investor sentiment today is very similar to what I saw 27 yrs ago. ” said popular market observer, Paul A. Ebeling, Jr. AKA the Red Roadmaster of www.stockpreacher.com , I do not doubt economy’s ability to recover as real consumer and business confidence, retail sales, exports and other indicators point to a rebound, not depression, Ebeling said. The S&P 500 reached its August 1982 low during the second US recession in three years.

Technology is the only one of the S&P 500’s 10 broadest industry groups that has kept pace with its average move in nine other Bull Markets since 1962. Tech is the leader.

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I am Bullish long term, the internal action of the market tells me that this correction is acting normally, and will soon yield to the long term up-trend.

March 9 to early June was red hot, with the (lagging) DJIA advancing 37% and the S&P 500 running up 41%.Since then, we are having a textbook one-month rotational  correction, sending the DJIA and the S&P 500 South by 6% and 7% respectively.

The Big Q: What does this mean?  
 
The Big A: From my POV, it is a buy signal. This new Bull Market is acting just like every previous Bull Market.

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Savvy stock market strategists are seeing the up arrows as the Big Q on the Street is: how much further the Bull can Charge before it stalls and lays down?.
Some traders believe a pullback has got to come and that this week is as good as any for that to happen, because of the low trade volume of trading, but others, many others several strategists say in notes they see stocks moving higher warning the naysayers could be proven wrong, and that this could be the beginning of a new Bull Market and a above average one at that..
Goldman Sachs strategists said they see progress on a number of economic fronts and are now boosting their exposure to cyclical stocks. Laszlo Birinyi says, if you look at history, it looks like the market’s still moving higher.
Citigroup’s Levkovich, chief U.S. equities strategist, said the investment community is “almost shocked” by the near 30 percent rise in the S&P 500 since early March, and that the case is building for a second half of Y 2009 recovery, that many investors are ignoring the fundamentals and following only the technicals in here.

Since early March, financials have risen 74%; cyclical consumer discretionary are + 46%; industrials gained 44%, and materials are up 41%, as the defensive sectors are under-performing. The move higher in the stock market is boosting US consumer confidence. For that reason, the market is seeing much better that average movement higher. A Key factor is that there are many of investors who missed the moves and are sitting with large cash hordes, about US$9.2Trillion.

Laszlo Biriniy says the market’s 53-day gain and 10 percent move above the 50-day moving average are second only to the market’s performance in 1933. He also says in a note that the net advances over the past 10 days are the third strongest in market history, and he makes a case for even more gains.
Brown Brothers Harriman’s Brian Rauscher, a long-time Bear turned Bullish in early March. He was concerned last month that the market could be showing signs of moving too far, too fast. But last Friday when asked does he think the market will go higher. He answered: “May have take a deep breath to get through 900 (a day or so), but this market is moving higher.”

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Sumner Redstone, the Chairman of CBS Corp, said last Wednesday that he believes that the US stock market is in the early stages of a new Bull Market. The octogenarian media mogul also said he has no plans to step down anytime soon or give up his controlling positions in CBS or Viacom. ”The one thing I would never do is lose control of CBS and Viacom,” he said, adding, “I have no intention of retiring or dying. I could live and work forever,” he said, attributing his robust health to antioxidants, exercise and a shot of Vodka a day.

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Gold is a role model, a leader if you will last week it rose hitting a 6 month high. In its role as a leader, some analysts are saying that Gold is telling us that the new team will succeed in turning this recession around, and inflation will eventually follow, which will push Gold’s Bull Market to higher levels in 2009 and into the years ahead. Gold is in a class by itself, as it ended 2008 with a gain and it continued to rise to a six-month high recently in spite of the rising US$. Gold is a barometer for the world’s financial stability, it is considered real money. Cash is king in the current cash strapped environment, and Gold is the ultimate cash vehicle becoming a alternative to holding cash and it’s showing the growing mistrust in the US$. Investors feel safe holding Gold because it does have real value and it is widely believed that with the US economy contracting at the fastest pace in 27 yrs (the most in 4Q since 1982) uncertainty will continue keeping Gold strong. Technically Gold’s ongoing bull market turns 8 yrs old this month. The 8 yr mark has been a consistent low time for Gold going back to the late 1960s when Gold began trading in the free market. Important lows vary from 7 years to 8 ½ years following the previous low, with the average being eight years. This recurring pattern indicates that the low could have been last November’s low, three months shy of 8 yrs. The long side would be a low this summer. The point is that Gold is near or at an important low time. This means that buyers will be buying on weakness (dips) this year speculating that it is reaching for a record high.

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World Gold demand in the retail and in the investment sector is now all-time highs, however estimates suggest that the world will only produce 76.8MM troy ozs during 2008 marking a 9% decline in world Gold production since 2001 as the Bull Market in Gold is growing and in a up-trend. The market has already pushed gold prices over 300% higher since 2001, and now with the world’s demand for Gold beginning to significantly outpace supplies, higher prices are predicted by analysts. During Q3 there was a 10.5MM oz deficit (US$8.5B) in world’s supply and demand of gold. Global Gold demand increased over 50% since Q2 while supplies dropped 64% year-on-year.

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