Market Timing Update: Buying the SP500 Index, Pros and Cons

UPDATE NOTE on 10-05-2011 – Gold’s Next Move: GLD Gold ETF Market Timing Update

UPDATE NOTE: I posted an Update (10-06-2011) on the SP500 Index Here: The Ascending Triangle: Key to Market Timing the Stock Markets

Market Timing Brief for 8-29-2011

To understand the format of this post, please review the prior Pro/Con post: Pros and Cons: Remove Fear and Greed and Invest Like Buffett

Investing at this level in the SP500 Index:

PROS:

– The market is continuing its rally from the early Friday swoon. If we hold today’s gains, we’ll see higher levels still.

– Banks and housing both above the prior lows now, reversing prior breakdowns.

– Dollar is fairly steady so far, although we’ll have to see if there is a further drop post Bernanke speech. The move was still within the range of where the dollar had been trading, not to a new low.

– It takes two quarters of negative GDP growth to define a recession, so a one quarter slip near the 0% growth point won’t matter in that definitional sense, although it makes unemployment worse. Spending will pick up in Q4 with holiday spending.

– Gold pulled back a bit, but surged after the Dr. B speech Friday. We’ll have to see if it moderates more on Monday. It is doing so thus far. GLD is down almost 2% so far today.

– Oil is still down considerably, even though it’s creeping up. Oil recovery is required for an economic recovery as they go hand in hand in the world today.

– Sentiment supports a rally to some extent (see link below)

CONS (to investing in the SP500 Index):

– The 8-26-2011 move in the markets was positive in that there was a recovery, but the rally needs to continue on Monday most likely or we’ll be back retesting the lows. It is continuing thus far.

– Now the market is a bit stretched after the run of the last couple of days.

– Banking is still weak (although it perked up in today’s trade).

– ECB’s Trichet said nothing at Jackson Hole on Sunday. Europe is a mess waiting for a rescue which is not showing up.

– Recession still looming given the 0.4% GDP growth number lately.

– Oil is moving up a bit and is now above the Feb. low. World demand is still there, so it’s likely to rise. Chinese growth was stronger than expected and that is the source of the greatest new demand. This could again put a damper on growth.

– If the unemployment figure is too high on Friday, the market will sell off again.

– Sentiment leans toward new lows eventually, even if there is an intervening rally, so why buy now? See link below for the data!

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