His call for this week (but read the full missive) in very short:
In recent weeks, copper, steel, and energy prices have crept higher. Additionally, building permits and housing starts have come in better than expected. Meanwhile, tax refunds are up 13.3% when compared to this time last year, which is probably why retail sales have stabilized despite rising unemployment. Only time will tell, but it feels like the economic deterioration is no longer accelerating? Could it be that the huge increase in money supply, negative real interest rates (inflation adjusted rates) and the reintermediation we have been speaking about are beginning to have a positive impact on the economy? The stock market might just be sensing that, having leaped off of a generational oversold condition into a 20%, ten-session, upside stampede that produced four 90% Upside Days (March 10th, 12th, 17th, and 18th) within a two week period. Such enthusiastic buying has tended to be associated with the start of new bull markets. Yet as the Lowry’s service notes, “Our 2002 study of 90% Days showed that the start of new bull markets are typically identified by a single 90% Upside Day, representing a rush of enthusiastic buyers which typically calms down after the first dramatic day. On rare occasions, two 90% Upside Days have been recorded in the first 30 days of a new bull market. However, until the Uptick Rule was eliminated, the past 60 years have not witnessed any cases of four 90% Upside Days within a period of just seven trading sessions.” To which we reply, “While we are cautious, we remain hopeful and continue to favor the upside until proven wrong, which is why we are still ‘long’ various indexes and have selectively been accumulating stocks.”
Be careful out there!
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