Capitalogix Commentary for the Week of 04/26/10

The rally has been strong. With the Dow Jones Industrial Average above 11,200, some are calling for an extended Bull market.

How Strong Has Breadth Been?  The Answer is "Pretty Strong".

With the advance over the past two months, the percentage of stocks above their 50-day moving average surged back towards prior highs. This chart shows that indicator is above 85% for the first time since January.

Some commentators take this as a strong bullish sign.  It helps to think of this indicator like a momentum oscillator. As such, it can become overbought and remain overbought during a strong uptrend. While relatively high readings may be considered overbought, it is also a sign of strength as long as this indicator remains at high levels. However, as the chart shows, a sharp decline below this level would increase the odds of a correction unfolding.

What is the State of the Current Economy?

Russell Investments publishes a nice summary of Market indicators.  In general, it shows that interest rates are high, and mortgage delinquencies are nearly off-the-chart, while most other indicators are at the low ends of their typical ranges.

Also worth noting, here, the VIX decreased to its lowest month-end level in over 33 months.

Volatility is Coming Back to the Markets, Though.

When the SEC announced civil fraud charges against Goldman Sachs, its shareholders proceeded to lose $12 billion.

Here is what their stock is doing now.

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View the full NYSE:GS chart at Wikinvest

If you are interested, the lawsuit stems from Goldman's 2007 Abacus deal.  Here is the presentation document they used to sell that deal. 

Here are some of the news items about this that caught my eye:

• Why The SEC's Theory Against Goldman Will Fail. (Forbes)
• Goldman Sachs & the SEC - Greedy Until Proven Guilty. (Economist)
• Goldman Sachs and America's Regulation & Supervision Paradox. (Globalist)
• Financial Reform? Obama to Wall St.: ‘Join Us, Instead of Fighting Us’. (NYTimes)

The Lighter Side of the Issue.

 Did you hear that Goldman Sachs made the Iceland volcano erupt? It did pretty well shorting airlines. 

The Goldman Sachs lawsuit and financial reform are becoming common topics of every-day humor.

It's one thing when the business press writes about a topic, it's another when it is the subject of a David Letterman Top-10 List, an on-going discussion on Jon Stewart, and the opening segment of Saturday Night Live.  What do you think it means that this issue is now in the mass media?

Business Posts Moving the Markets that I Found Interesting This Week:

• Intel Profits and Outlook Blow Past Expectations (DailyFinance)
• IBM Q1 Earnings Beat Street: Growth May Be Returning To The Tech Sector. (InfoWeek)
• Data Shows U.S. Service Sector is Expanding. (Time)
• Speculators Predict A 20% Collapse In The NASDAQ. (BusinessInsider)
• Louis Navellier on Why the Market's Rally Will End Next Week. (Forbes)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Third of U.S. Teens With Phones Text 100 Times a Day. (Reuters)
• Arizona 'Birther Bill' Requires Obama to Show Birth Certificate. (Newser)
• Next Generation iPhone Found in a Bar. Here Are the Details. (YNews)
• Cirque du Soleil Plans Michael Jackson Shows. (WSJ)
• Does Brain Training Work? Doing Anything is Better than Nothing. (NewScientist)
• More Posts with Lighter Ideas and Fun Links.

Related articles by Zemanta

• Headlines Exaggerating Economic Strength (pragcap.com)
• I have just hedged my equities by going long volatility (investmentpostcards.com)
• The VIX FAQ (by Steve) (slopeofhope.com)
• Nasdaq TICK At Decade Lows, While Index Powers Ahead (tradersnarrative.com)
• [Abacus] The prospectus (ftalphaville.ft.com)