The proverbial question is we in a V shaped recovery or a Bear Market Rally. Without predicting (One word every true trend follower hates) there are signs becoming apparent the stock market rally from March might be coming to an end. There are technical indicators which are pointing to weakness as well as recent economic figures are beginning to disappoint investors hoping for a recovery.

The stock market is down approx 5 percent from its 2009 peak of 1097.91 on Oct. 19. What more so troubling is that the SP 500 index is below its 50 day moving average. The 200 day moving average is currently at 981. A break below this number would be considered very negative. More so there have been distinct divergences between current price action and numerous momentum indicators.

Besides the technical’s there are the fundamental issues…such as the Commerce Department figures released on Oct. 30 showed Americans cut spending in September, the first reduction in five months. Foreclosures are increasing…unemployment has been increasing. Simple question… how can companies be making money…people are spending less... people are losing their homes… people are losing their jobs? It is pretty obvious to question this rally as so many have.

However Obama has come out with his recent radio address.. “We have made progress”!

Maybe I am missing something but I do not understand what progress…except as trying to convince people we are out of the woods.
Paul Tudor Jones has come out very loudly and stated that the rally since March has been a Bear Market rally. As well Christopher Wood, chief strategist at CLSA Ltd has told his readers after Friday’s action to go short the US Stock Indices. Nouriel Roubini is sounding much more of the profit of doom again.

Trend followers do not make predictions. This is not my goal but the green shoots are looking very unhealthy and the ramifications can be very hard for stock market investors. When commodity trading and investing it is paramount to have a plan and have the discipline to stick with it. There are too many investors who bought this stock market rally without a plan. Trading without a plan can destroy a portfolio.

Andrew Abraham
www.myinvestorsplace.com

Andrew Abraham has been in the financial arena since 1990. He is a commodity trading ddvisor and co manager of a Commodity Pool. Since 1993 Andrew has been a proponent of quantitative mechanical trading programs. Andrew's major concern is not only total return on investment but rather the amount of risk that one would have to tolerate in order to achieve returns He focuses on developing quant models that encompass strict risk adherence and correlation. He has been a speaker at conferences as well as an author of numerous articles. Andrew has spent years researching ideas that have the potential to outperform indices as well as maintain fewer draw downs.

Visit Angus Jackson Partners (http://www.angusjacksonpartners.com) Contact: A.Abraham@AngusJackson.com (mailto:A.Abraham@AngusJackson.com)

© 2009 Copyright Andrew Abraham - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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