May 2009 In Preview
Today officially begins the trading month of May. And traditionally the worse 6 months in the market. In the April preview, I posted that …
… the acid test will be May. The real stress test will be at the end of Q2 and throughout Q3 (traditionally the worse quarter of any year).
I am so tempted to follow the crowd of believers that this rally truly has legs. Am I being swayed by the April rally’s effect? Common sense tells me that the rally has been running on empty, pretty much like what has been going on in the Asian Markets today;
- Hang Seng +5.54%,
- STI +5.65%,
- KOSPI +2.09%,
- Aussie ASX200 +3.01%,
- Sensex +6.41%,
- TAIEX +5.64%,
- Shanghai Comp +3.32%
The NIKKEI225 ended the biggest loser by keeping its market closed today. For the record, the S&P Asia Index closed up +5.23% while the MSCI Asia Apex 50 was also higher at +5.43%.
Have I over analyzed the markets? Am I missing something? There was nothing on the cards to justify this rally today or does a little bit of good news overshadow all the bad stuff in today’s market? Maybe bad news has reached saturation point and nothing affects the markets anymore. Maybe we’re so numb to negativity that we son’t give a s**t anymore.
Whatever the reason, I am still confused about all this. Here’s my most likely analysis … the market is PRICING IN a mega drop by rallying as much as it can while it still can. If that holds true, by golly, we’re in for a stinker-tanker this May.
Christmas Wish #1 Update
After all that bearish talk in recent months, I am glad to bring you this update on my Christmas 2008 Wishlist.
First criteria to become less Bearish:
1. Uncle Ben to stop bailing & stimulating
2. A Beautiful Curve that’s not too steep on the T-Bond Yields
3. Manufacturing & Production to stop falling
4. Consumer Expectation to start recovering
Target: 2nd Quarter 2009
Reaction: Market Bottom
Time: 3 to 6 months later
In my April 2009 In Preview post, I wrote:
Right now, wish #2 is granted and it would seem that Uncles Ben and Obama are beginning to grant me wish #1 as they tighten up the TARP and readily reject calls for more taxpayer monies … As for wishes #3 and #4 for Q2, we’re going to have to wait till we’re midway through Q2 to see if we do get them. Yesterday’s Consumer Expectations showed an improvement over February’s numbers but still came in under expectations … in a sense, better than feared. So maybe, wish #4 may be happening …
Wish number #4 came in last week when Consumer Confidence beat expectations that were revised UP (39.2 vs 29.7 consensus). Wish #3 has a myriad of numbers that broadly indicate that numbers are generally in-line and slightly better-than-feared with a couple of slightly negative returns on insigificant data.
Wish #2 has been a constant …
… now that’s a nice curve.
Wish #1 is the latest update … on Friday 1 May 2009, Preseident Obama said that “the economy didn’t need any more stimulus.” Now that’s the best news I’ve heard in a long time.
With that, Wish List #1 is complete (I hope) and we should see a market bottom by October 2009 at the soonest or April 2010 at the latest, according to my First Criteria to become less Bearish.
Now I can look forward to ticking off some of the wishes on Wish List #2;
Next criteria to consider being Bullish:
- A drop or stall in Job Cuts and Foreclosures
- Consecutive increases in Non-Farm Payrolls into Positives
- Technology Companies to start producing
- Financials & HMOs to start stabalizing
Target: End of 4th Quarter 2009
Reaction:
- Tech Market Leadership
- Financials Recovering
- Strength In Housing/Construction
Time: 4 to 5 months later
So where does that leave us in relation to where May will go? Honestly, I don’t know. If candlesticks are anything to go by, we’ll get a third candle reversal on Monthly candles which means May should finish down. If technicals hold true, the DOW will have a lot of resistance to break between 8,200 to 9,500. If cycles stay reliable, May will suck.
In the middle of all that, I am still holding out for that proverbial drop that will get the DOW to unbelievable depths.
Till then, I am upgrading my trading status to Conservative from Bearish.
Cheers! and Happy Hunting!
[by Conrad Lim]
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