Another up week
by Peter Switzer
If the all-important indexes in New York — the Dow Jones, the S&P 500 and the Nasdaq — continue to defy gravity, well so will we. But, as all the experts assure us, it can’t go on forever, though it still could keep going up with some down days in between.
Blue sky ahead
On the matter of numbers and adding weight to my argument that we could keep on rising for some time, the S&P 500 closed on Friday at 1,068 and this was an important close. During the week the index broke through 1,053 or 1,067. The numbers people had slight disagreement over what level was important but they all agreed that closing above 1,067 for the week was crucial.
This kind of close, in the world of charts, implies there is blue sky ahead for the market.
In fact, things are generally working out on the US stock market with volumes up, the volatility or fear index down and advancing stocks beat decliners to the tune of two to three.
(The volatility index at 23.95 means volatility is down 40 per cent for the year-to-date.)
For the year the Dow is up 11.89 per cent, the Nasdaq 35.25 per cent and the S&P 500 has put on 18.27 per cent, and the 10 sectors that make up the broader stock market all were in positive territory.
Anyone looking for a stock to underline the better footing for things, just look at the stock GE, which was up more than 12 per cent last week!
GE is into all manner of manufacturing businesses and even owns NBC, which includes the Seinfeld television series, but it was its finance division that really KO’d the company. This share price comeback could be a significant bellwether indicator.
Good news week
This good week coincided with good US economic feedback.
Fed Chairman Ben Bernanke’s the “recession is probably over” comments helped, despite the lack of certainty. Also the Philadelphia Fed survey for September rose 10 points to 14.1 and this was the best result for this measure of industrial action for 27 months!
Stocks-wise there could be a sell-off at the end of September because that’s the end of the Yanks’ tax year but a big panic would have to be driven by really bad news. Profit-taking and the fact the market looks overbought could lead to some share dumping but the army with cash on the sidelines will still put a floor under any sell down.
It should be noted that the AFR pointed to a guy called David Hunt from Adest, who apparently has a good market call reputation, though I have never heard of him, who says a sell-off looms. He expects the S&P/ASX 200 to fall to around 2,900 next year! (That’s one for the bears, though I can’t see it happening as bad as that.)
On the positive side, IPOs in the US are on the rise and the fact that new REITs are emerging to pick up sold off real estate assets is a good sign.
The good omens are still in great supply and the numbers still stack up that shares can keep on rising, albeit with some bad days for bulls.
Follow the US
On the local front, the big share buying has taken our average market price/earnings ratio to 15.5 while our historical average is around 14.
And so it would be a trigger for the market to move down but while the numbers keep stacking up in the USA, we can keep on rising.
When those numbers Stateside start to ‘de-stack’ we might succumb to gravity but it will have to be a surprise shocker to make sense of David “the bellringer” Hunt’s big call.
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Published on: Monday, September 21, 2009blog comments powered by Disqus