Thursday, March 19, 2009

What's Working?

Having scanned at least a hundred various funds for signs of life, the pickings are still very slim on the long side. Precious metals are in a reasonable uptrend. The injection of massive public stimulus, the prospect of inflation down the road and questions about the dollar all are constructive for precious metals.

Otherwise only technology seems to be working its way higher creeping along either side of the 50 day moving average. Other sectors are quite mired on the underside of the 50dma line. Although still below the moving average, I am beginning to see clear signs of flattening. Sellers exhaustion? Better valuations? Whichever it is, there is a distinct bottoming process beginning.

I have some concerns that first quarter earnings and continued rising unemployment claims are going to be a nasty jolt of reality in the next month. The question will be, how much of that reality is already baked in the cake? If we see terrible numbers and a modest reaction that will be a positive sign. I haven't heard ANY positive spin lately on corporate earning so we will be looking for lessening of declines. At some point we will hit a lower water mark before beginning a slow recovery. Same hole, slower digging.

Apart from equities investors should be watching for continuing weakness in the dollar or rising inflation expections. The dollar looks terrible, but everything else looks worse, so that remains a watch more than a strong position.

John Barnyak