Awaiting the results of the stress test
Steve Cook on Disciplined Investing

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Economics

   This Week’s Data

    The Institute for Supply Management reported its April nonmanufacturing index at 43.7 versus expectations of 42.0 and 40.8 recorded in March.
    http://mjperry.blogspot.com/2009/05/more-evidence-that-us-economy-is.html

    The International Council of Shopping Centers reported weekly sales of major retailers rose 0.7% versus the prior week but fell 0.8% on a year over year basis; Redbook Research reported month to date retail chain store sales increased .3% versus the comparable period a year ago.

   Other

    The bull case on the economy:
    http://www.forbes.com/2009/05/04/recovery-indicators-unemployment-opinions-columnists-recession.html

    And the bear case:
    http://online.wsj.com/article/SB124147831175584985.html

    Some perspective on the ‘end’ of the recession:
    http://mjperry.blogspot.com/2009/05/is-recession-over.html

    I mentioned an improvement in the manufacturing data coming out of India and China.  Here is a pictorial of that data:
    http://mjperry.blogspot.com/2009/05/india-and-china-mfg-data-fuel-rise-in.html

    There are still bumps in the road ahead for housing:
    http://www.ritholtz.com/blog/2009/05/22-of-homeowners-underwater/

Politics

  Domestic

    A hedge manager responds to our Philosopher King’s trashing of the Chrysler bondholders:
    http://finance.yahoo.com/tech-ticker/article/241837/Hedge-Fund-Leader-Blasts-Obama-for-

  International War Against Radical Islam

The Market
    
    Technical

    Yesterday was a boring day by recent standards; and boring is not a bad thing following Monday’s breakout performance.  Indeed the real absence of any sustained selling was a positive. 
    http://tradermike.net/2009/05/cinco-de-mayo-2009-stock-market-recap/

The indices (DJIA 8410, S&P 903) are now in a very short term up trend off their March lows.  The lower boundary of that up trend at yesterday’s close was circa DJIA 8218, S&P 881.  Resistance exists at DJIA 9078, S&P 947, support at DJIA 7437, S&P 740 and DJIA 6432, S&P 666.

    Market breadth (stocks above their 50 moving average) now over 90%:
    http://bespokeinvest.typepad.com/bespoke/2009/05/breadth-by-the-50day.html

    An interesting thought on a potential decline in the Market:
    http://bespokeinvest.typepad.com/bespoke/2009/05/sp-price-action.html

    Past year’s correlation with 2009:
    http://bespokeinvest.typepad.com/bespoke/2009/05/past-years-most-correlated-with-2009.html
 

   Fundamental
   
    Yesterday’s headlines (not much) impacting the Market:

(1)    Bernanke testified before the House. While reviewing the obvious problems the economy is facing, I would characterize his comments as generally upbeat.

               Here’s a transcript of his testimony, for those who missed it and care:
    http://www.federalreserve.gov/newsevents/testimony/bernanke20090505a.htm

Fact checking Bernanke:
    http://www.calculatedriskblog.com/2009/05/fact-checking-bernanke-on-real-estate.html

(2) actually what seems to be on everyone’s mind is the results of the ‘stress test’ even though there has been a steady stream on leaks.  A point of clarification on Thursday’s announcement of the results of the ‘stress test’:  my original understanding was that part of this release would include the plan to raise capital for those banks designated as needing it.  Yesterday, Treasury indicated that those banks would have six weeks to present their plans for raising capital. 

        More leaked results of the ‘stress test’:
    http://www.ritholtz.com/blog/2009/05/bank-of-america-needs-34-billion/

        We are now learning the conditions under which banks can pay back TARP:
    http://www.calculatedriskblog.com/2009/05/report-us-setting-conditions-for-banks.html





Posted 05-06-2009 8:34 AM by Steve Cook
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