Emerging Markets Are Flying High, Are You still waiting for the right time to Invest?

The stock markets in the US have gone up in rally mode recently. The S&P 500 crossed the technically important 200 day moving average line and held there. The technicians and stock brokers tell us that we need to stay here for a few days to a week or so to show it’s for real. So far, so good. We did get a few days at this level under our belt. Other good news illustrates that the Baltic dry shipping index is improving. This suggests that import/export shipping activity is getting better. Possibly, the world economy may be on the mend. Emerging markets are also flying high. However, that is due to commodities rising in price.

The technicians who look at the US markets tell us we are probably going to have a period now of consolidation. A few economists say a “V” shaped rally could happen—and has from the 667 lows of the S&P 500 since March. But others say it is rare for this to occur and expect another drop in the market with a “W” shaped recovery to materialize. Other chart patterns may also be seen instead. So where’s your money? Are you in? Should you be?

The 200 day moving average has been penetrated. It is also a resistance level. In addition, complicating this is the fact that the moving average is heading downward. To confirm a rally, it needs to reverse and go up. Into the bargain, the S&P necessarily must break the 1300 level observed 200 days ago. Similar things can be seen in the Russell 2000 and Dow Jones charts. So we can expect a degree of consolidation and a movement downward for awhile. Time for a base to form and then we shall see where we can go. Where are putting your money?

However, most of the economic news is bleak. Unemployment rate was reported in the 9 % area with continued job losses (about 345,000) observed. Private economists think the level is much higher and it deals with how the government counts—which taint like me and you. If you quit looking for a job after a month of being unemployed, you are no longer counted as unemployed. Neat idea. Things are much worse than we can now distinguish. Several more %points could be added to get a more realistic perception of unemployment. But wait another month, then this month will re re-adjusted and we will get at the truth then. The recession may end in the third of fourth quarter, but can we get out of the mess we are in?

But are we worried? No because Uncle Sam has a stimulus package out there engendering great jobs—fixing our highways, bridges etc. Now that is good as we certainly need it—but remember I heard that even with all this work going on, we may still need 2 trillion more to fix the roadways. The basic problem is that these jobs won’t fix the economy. They are the wrong kind.