Resistance

The S&P has hit its resistance line for the 3rd time in the past 5 months. The S&P closed slightly above the resistance line on Monday, and then fell below it on Tuesday. This means the S&P is now testing a critical 5 month resistance level. The S&P 500 needs to move past this resistance level in order to keep the market moving higher. A downside failure would result in a pull back. Stay safe, and trade smartly!

Are Markets Leading Indicators?

Not according to this chart - how do you explain the Dow (and S&P 500 and Nasdaq) lagging behind the peak in Housing and Banking?

Slope of Hope?

The 50 day moving average has been an important repellant to rally attempts on the S&P 500, and this week proved another episode where the Bears held off the Bulls as the index approached this important technical supply hurdle.

Market psychology changed from "bullish about suddenly profitable banks and the Fed pulling out the big guns to battle the downturn" to "If the Fed is taking such strong measures, how bad is this economy and what does that bode for corporate earnings?"

Be careful out there...

Statisticians Rule!

“I keep saying the sexy job in the next ten years will be statisticians. People think I’m joking, but who would’ve guessed that computer engineers would’ve been the sexy job of the 1990s?”

-Hal Varian, The McKinsey Quarterly, January 2009

Well, not quite sex symbols. But as Google’s chief economist (and former NYT columnist) Hal Varian observes, statistics are the up and coming sexy mathematics field.

Looking at how technology empowers innovation, he adds:

"The ability to take data—to be able to understand it, to process it, to extract value from it, to visualize it, to communicate it—that’s going to be a hugely important skill in the next decades, not only at the professional level but even at the educational level for elementary school kids, for high school kids, for college kids. Because now we really do have essentially free and ubiquitous data. So the complimentary scarce factor is the ability to understand that data and extract value from it.

I think statisticians are part of it, but it’s just a part. You also want to be able to visualize the data, communicate the data, and utilize it effectively. But I do think those skills—of being able to access, understand, and communicate the insights you get from data analysis—are going to be extremely important. Managers need to be able to access and understand the data themselves."

Friday's Unemployment Report

The next batch of monthly unemployment numbers roll out on Friday. Trend estimates are at around 650,000 additional job losses for February. I would not be surprised to see a number in excess of 700,000 lost jobs. And, I would not be surprised to see an 8% unemployment rate.

If these expectations/predictions prove accurate, we will have seen a total of 3 million jobs lost since "the day the world changed" when Lehman Brothers went bankrupt in mid September and the whole Bail-out chain of events began in the fall.

Interestingly, we may see a very sharp rally in the stock markets on the news, unless job losses are even greater (800,000 losses or more). We shall see, buckle up...

The Bear Bottoming Process

How does the current bear compare with previous bear markets? Since 1950, the bottoming process has ranged from around six weeks to eight months. We're now well into the fourth month of an apparent bottoming process.

Above is a chart showing today's bear with the eight completed bear markets since 1950 and how the S&P 500 index performed during the 12 months following the index low. Also included is the near-bear decline that accompanied the Gulf War of 1990 — just shy of the 20% decline of an "official" bear.

My, How the Mighty Have Fallen

From 2002 to 2006, General Electric and Exxon Mobil went back and forth as the largest company by market cap before Exxon finally pushed GE off the side of the cliff in 2007. As shown in the chart above, there is no comparison between the two companies anymore, as Exxon is worth $366 billion and GE is worth just $96 billion. GE has a lot of work to do before it gets back in the hunt as the world's largest company.