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created: 2008-03-31 04:06:51
Updated Forecast and Weekly Outlook
********************************************** http://www.swingtradinglab.com/ 28th March 2008 WEEKLY UPDATE & FORECAST Don’t forget to get you full 11 page report by logging into the website. http://www.swingtradinglab.com/ *********************************************** The week started on a positive note with the thought that most of the financial woes were behind us. But as economic reports filtered through this week there was no doubt that the housing sector had suffered the blows and housing prices dropped more than 10% for the month of January but on a positive note there were increased home sales for February by 2.9%. The FED keeps throwing money into market boosting liquidity and dropping the rates but the financial sector suffered the worst. Its now clear that that earning across the board are going to be affected as companies are recording and warning us lower than expected results, this putting a dampener on the entire market and sentiment is at extreme lows. A wave of gloomy data on Thursday that included retail spending confirms that the US is in real danger of recession. In fact ECRI’s leading index was -10.4% in the week of March 14 and has been recessionary all year. ECRI’s chief Laksham Achuthan conceded and stated that the economy has “unambiguously turned onto a recession track”. There isn’t much good news this week as we will see that more news will come in form various other sources confirming recession, but the proof is in the GDP and observing two successive negative GDP quarters that confirms recession. This week gold and oil rallied again making up some lost ground from last week. The TNX is in a free fall losing 0.08 of point. The NDX and Transports were remarkable resilient gaining 0.42% and 0.98% respectively. Next week brings about more interesting economic news as factory orders and auto sales will be released along with crude inventories. Once again we had news that was less than impressive the market responded aptly. ECRI finally confirmed it’s time for a recession and we’ll soon have further reports of recession and poor company earnings and further write-downs, generally that’s not great! Jobless Claims jumped to post-Katrina highs and manufacturing is still contracting as the Philly Fed index came in at -17.4 the fourth straight month of contraction. BUT…. When the news is bad the market has a tendency to do the opposite. Some sectors are showing snippets of recovery including the Staples and Industrials and large cap SP100. The VIX is leveling off and as yet we don’t have increasing volatility levels and the indexes are marinating their supports, that all sounds positive…doesn’t it! Well we need to remember that when in bear market the bear has the strength and we should be very cautious before we get too courageous and take him on. Unless we start to see signs of more positive economic news the stock market will not respond with much conviction. Any rally may be quickly smacked back into place, as we witnessed last week. We are dealing with a two headed beast at the moment; if supports fail we will see some real signs of a recessionary economy and further devaluations of stocks. If supports hold I think there will be a short term recovery in the stock market as confidence returns but eh real indicator will economic recovery and that will take time to get back on track. So what happens next week? I have mixed signals from the NDX, DJIA, SP500, and DJU, DJT slightly positive signals from XLI, XLF and XLP. For those that are gutsy enough go for longs in the XLP and XLI sector and keep stops tight. For the rest of us stay out until a clear signal is given in either direction as this week is one of those weeks where direction is difficult to call, keep in mind the trend is still DOWN. Good luck