Investment Notes

The market continues to rally. Many indices are at or above their highs for the year. The NASDAQ and the Russell 2000 are positive as is the old Wilshire 5000. Big caps and value are the losers for now. Growth is what is taking the markets up. This is also the area where speculation and short covering rallies are common. Government intervention into the economy is distorting or postponing problems. It remains a nice trading rally in a long term down trend.

We said 2 months the Dow could rally 1000 points. We’ve gotten 700 points of that so far. The 200 day moving average is around 8765. It went to 8760 today before retreating. It seems possible for the Dow to go 9000 or higher this summer. The economy may be an upside surprise and with it, a scare of inflation.

We came up with a “financial hurricane season” to describe what is likely to happen over the next few years. We are likely to have alternating periods of investor optimism and fear as different economic, geo-political and natural events occur. Some events may be like last fall or spring (category 5 financial system collapse) while some new tax increase or other profit
hurting legislation may be a category 2 or 3 where the markets have mild corrections. We still believe these events will take the market to lower lows over time.

The next few weeks could be used for trading trend channels and breakouts. Growth/speculations are likely to better than safety. (Watch for better entry points than today.)

The first of the month buying came in as it may for the next 2 or 3 days) Don’t chase stocks, raise some cash as an allocation, to get rid of some of the losers and take some profits in your portfolio. Watch legislation for changes in market or sector direction.(6-1-09)