Top Line: We think the market will try one last little rally this week before we take the plunge to produce the 2008 lows. We should have a good selling opportunity this week.
Last Friday, a long time ago indeed, we had a divergent stock market with the financials and the techs going in opposite directions. With the GOOG news, the tech portion fell out of bed but the financials were doing much better.
As we take a look at a company like C (Citicorp), we see a low stuck in last Tuesday just around 14 and by Friday, C was trading over 20 before closing at 19.35. Let's look at another one, say AIG. Same time frame, Tuesday morning AIG traded down to 19.73 (oh man) and it closed on Friday at 25.07. As you see, both of these stocks are up over 25% in about three days. Of course, the GOOG's of the world didn't fare nearly as well. GOOG closed down nearly 10% on Friday.
The very problem we are concerned with this week is the differences in these two big sectors that we do like to keep our eye on. It's never easy but the divergence we saw on Friday raises the level of difficulty. We expect a fairly good rally that will lift both of these sectors and show the market has the ability to rally. But, the tech sector seems to have a little more upside to go compared to the financials which, as you can see above, have jumped over the past few days.
There are two articles of interest from the weekend. Once comes from James Grant who has an article in the WSJ this weekend entitled, "Why No Outrage?" This is a pay site as we have mentioned before but sometimes you can get it free so we post up the link for you.
The other article comes from Gretchen Morgenson of the NY Times. Her article highlights the debt position of a person who has gone over the edge with some difficulty of getting out of debt, "Given a Shovel, Americans Dig Deeper Into Debt ".
More Monday evening...
FSI: 80.45 (still above the April 17th price level)