Where do we go now?
This month: An update
on the market action along with reminders about
tax limits for 08 & 09
Last
month I spelled out 3 potential catalysts that
would reverse the downward momentum in the markets.
Here is an update along with some things to watch
for determining if this up move has potential:
Last
Month's arguments for momentum change:
"1.
We have just registered weekly and monthly exhaustion
levels with the S&P on a widely followed technical
indicator. This usually precludes a 1 to 4 month
counter trend rally. Note: although the indicator
means the month of March should close higher than
February, it doesn't mean that we can't take a
stab lower prior to recovering later in March
(think V shaped bottom)"
update:
This seems to be playing out as the S&P hit
a low around 670 last Monday and is now sitting
at 800.
2.
"Mark to Market account change: The
current accounting rule requires companies to
mark their assets at current market prices, which
is why we have so many problems with highly leveraged
institutions."
update:
there has been a lot of discussion recently in
congress and with the fasb regarding this rule.
No change as of yet, but banks are moving higher
possibly in anticipation of a change.
3.
"CDS backstop: I won't go into this to
much but just to say that Credit Default Swaps
are a derivative with nightmare proportions."
update:
nothing here yet but suffice it to say that a
large portion of that 170 Billion given to AIG
went to counterparty institutions such as Goldman
Sachs to cover the CDS losses. If we see a sweeping
change in CDS contracts it will be a game changer
and will propel the market higher.
Bear
Market rally or something else?
There
is a lot of resistance here at the 800 level on
the S&P and we are due for a pause. A couple
of positive factors to note: financials, transports
and retailers led this move higher. These are
leadership sectors that we need to sustain any
move.
Another
positive is a possible move above $50 a barrel
in oil. While it may cost you a bit more at the
pump, energy makes up a large portion of the S&P
weighting and if we can move above $50/bbl then
it will continue lifting the S&P.
Lastly,
the Fed move yesterday to print $1 Trillion to
buy up long bonds and mortgage securities is a
big move. We won't debate the longer term implications
but shorter term this will drop the dollar and
have positive impacts on stocks / commodities.
My
gut feel is that we continue to rally through
early summer. There is a potential for
the S&P to move up to 1000 or so. After that
it is a toss up on whether we have to make another
run lower or if we hold the gains.
Reminder
of Tax limits for 2008 / 2009:
2008
For
those readying their 08 returns here is a reminder
on last minute IRA contributions:
Roth
income restrictions: $159k married filing jointly
/ $101k single. Over these amounts and you phase
out of eligibility.
IRA
limits: $5000 plus $1000 over 50 catchup
2009
Roth
income restrictions: $166k married filing jointly
/ $105k single. Over these amounts and you phase
out of eligibility.
IRA
limits: $5000 plus $1000 over 50 catchup
401k
limits: $16,500 plus $5500 over 50 catchup
SIMPLE
IRA: $11,500 plus $2500 over 50 catchp
SEP
IRA (DC plan limit): $49,000
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