The markets have certainly had a pretty nice run over the last week, and looked as if they wanted to go higher. With the G-20 Meeting this past weekend, a precursor to the Meeting on April 2, culminating in a statement dedicated to “decisive, coordinated and comprehensive action…whatever action is necessary until growth is restored,” I’d say that governments around the world are a lot more focused on attacking the crisis, instead of standing still like a deer in head lights.
Chairman of the Federal Reserve Ben Bernanke, in his inteview on 60 Minutes this weekend, gave us much more insight than usual into his perspective on the Federal Reserve’s response to the crisis so far, as well as his outlook on the economy moving forward. Right off the bat, Bernanke adds exponentially to the positive sentiment dominating the markets right now when he says that he thinks “we’ll see the recession coming to an end prob’ly this year, we’ll see recovery beginning next year, and it’ll pick up steam over time.”
Even though the market took a little break today from the gains posted the previous 4 sessions, things certainly seem poised for a nice little rally, whether it be a “Bear market rally” or not. However, the question remains, as always, how far will it go, and how long will it last? To answer that, first it’s important to know what’s coming up this week.
Indeed, aside from the reading on the Consumer Price Index this Wednesday, and a few important economic indicators on Thursday, there does not seem to be anything too significant on the horizon until roughly the end of March/beginning of April. The House Financial Services Subcommittee Hearing today regarding the suspension of mark-to-market accounting rules could certainly be the positive catalyst the banking sector needs in order to continue its move to the upside, and right now whatever’s good for the banks, is good for the market. We’ve even gotten to the point where flat quarterly numbers, or flat monthly retail sales, are positive enough to lead to few more green days, simply because flat isn’t down, and that’s great right now.
Still, the slightest hint of negativity could send the Dow right back down to the 6500 level, and I don’t see anything equally positive enough to push the Dow sustainably back to or beyond 8000. I highly doubt we’ll even get that high before retesting the recent lows. As such, it is important for all investors to understand that if you didn’t get positioned for this “rally” by now, you might be in danger of “buying at the top.” Wait for the next dip. Another shoe could drop, and another bank could need another loan at any moment. The market will always provide an opportunity to get in on a rally somewhere. Those that were able to get favorably postitioned last week or prior, and are currently sitting on some profits, my suggestion would be to take those profits off the table at the first sign of selling pressure. Now, again, I’m no guru, I’m no “expert,” and nothing on this site constitutes a recommendation to buy or sell anything nor to take any action in the financial markets whatsoever. However, as a former stockbroker with the responsibility of making money for over 100 high net worth clients at one time, I am 100% certain that those investors with profits to take will not be happy seeing those profits evaporate if something, anything, causes the market to tumble farther than it did today. As one cliche I constantly heard as a broker goes, “A bird in the hand beats two in the bush!”