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Rally brewing - me thinks...
By Dr. John L. Faessel
ON THE MARKET
Commentary and Insights
Dr.Faessel@onthemar.com
Friday - 2/6/2009
The March to and Into Socialism.
For perspective in quantifying the new Stimulus Plan let's recall budget of The United States Department of Homeland Security (the largest Government reorganization in 50 years) that cost a measly $31 billion in 2003. Now - yea Gods - inside the proposed Stimulus Plan our out of control new administration wants to spend over a trillion (and counting) in pork to dump onto their pals.
Here are a few more opprobrious items in the bill from yesterdays WSJ:
- Title VI, Financial Services and General Government, says that "not less than $6,000,000,000 shall be used for construction, repair, and alteration of Federal buildings." There's enough money there to name a building after every Member of Congress.
- The Bureau of Land Management gets $325,000,000 to spend fixing federal land, including "trail repair" and "remediation of abandoned mines or well sites," no doubt left over from the 19th-century land rush.
- The Centers for Disease Control and Prevention are getting $462,000,000 for "equipment, construction, and renovation of facilities, including necessary repairs and improvements to leased laboratories."
- The National Institute of Standards gets $357,000,000 for the "construction of research facilities." The Oceanic and Atmospheric Administration gets $427,000,000 for that. The country is in an economic meltdown and the federal government is redecorating.
- The FBI gets $75,000,000 for "salaries and expenses." Inside the $6,200,000,000 Weatherization Assistance Program one finds "expenses" of $500,000,000. How many bureaucrats does it take to "expense" a half-billion dollars?
- The current, Senate-amended version now lists "an additional amount to be deposited in the Federal Buildings Fund, $9,048,000,000." Of this, "not less than $6,000,000,000 shall be available for measures necessary to convert GSA facilities to High-Performance Green Buildings." High performance?
- Since December 2007, Americans lost 791,000 jobs in manufacturing, 681,000 jobs in professional and business services, 632,000 jobs in construction, 522,000 jobs in retail, 167,000 jobs in hospitality, and 576,000 jobs in the rest of the service industry. It would be logical for policy makers to focus on job creation in these sectors.
- Instead, Democrats want to spend $88 billion to increase the federal share of Medicaid. What American will be hired by a small business, factory, retail shop, hotel, and restaurant or service company because of this spending? The answer is very few.
Yesterday, major stock indexes got knocked down initially and then plowed higher to be rejected time and again at S&P 500 (SPX) 850 resistance that I have been referencing. The buzz was that the banks won’t be nationalized and there was a murmur re the marking-to-market rules; those items threw a bone to the financials and they got a respite and banks rallied.
The good news; the lows held again. The short term support is now (SPX) 840. Resistance is tough at 850 and just below 860.
It’s important that short-term fear is waning. That’s Bearish!
I’m a believer that there’s a mighty Bear-Market rally brewing. The tech rich NASDAQ has been outperforming while the banks have kept the general market on hold. Perhaps if we get some good news re the banks on Monday we could fire a hot rally. Shorts are on hold, so today I’d expect an upward bias.
Sentiment and oversold / overbought indicators are tepid. Of note; Yesterday’s CBOE Total Exchange Volume Put / Call Ratio was 0.75. This number equals the 0.75 of late December 2009. Conspicuously the prior post of 0.75 was also the lowest number since April 20, 2007. Yesterday’s McClellan Oscillator (my favorite overbought / oversold indictor) closed at a minus and neutral 6. The (VIX) closed at 43. No fear here!
The Treasury 10-Year note was unchanged at yield of 2.96%.
Dr. John L. Faessel: Dr.Faessel@onthemar.com
Published at Investorideas.com Financial Article Feed : http://www.investorideas.com/RSS/feeds/II-Art.xml
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