What to Buy in This Market
by Sam Collins 09/21/09
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Money market fund assets are down some, but not nearly as much as I would have guessed. From January until March, total deposits in money markets averaged around $3.9 billon. During August and September, they have averaged about $3.5 billion, which is about where they were in March of 2008, just prior to a 900-point rally.
That alone isn't predictive of anything. And neither is Investors Intelligence's (II) Advisors Sentiment index. II is very good at measuring and comparing sentiment from a number of sources and then matching it to corresponding market history. With regard to letter writers, II's assumption is that most of them are consistently wrong, and they are correct.
Currently, the bears are up slightly and the bulls are down slightly, and although the overall reading is somewhat bearish, i.e., overbought, it has improved over the last three weeks.
Conclusion: neutral.
How about the small investor? I use the American Association of Individual Investors' (AAII) Sentiment Survey for a measurement of the public's view of the market. This past week, the bulls slightly outnumbered bears after four weeks of an opposite reading. But there is just 2.14% separating them, and that is too small to give us direction.
Conclusion: Momentum is still strongly in favor of the bulls, so we will remain long. However, with nine gains in the last 11 days and the S&P 500 now almost 20% above its 200-day moving average, we should be cautious about adding new positions in U.S. stocks. However, I remain a buyer of precious metals ETFs, emerging markets ETFs and other foreign market ETFs.
Today's Trading Landscape
Earnings to be reported include: Lennar Corp. (LEN) and Synnex Corp. (SNX).
Economic report due: Conference Board index of leading economic indicators (the consensus expects 0.7%).
Late news: Dell (DELL) to acquire Perot Systems (PER) for $3.9 billion.
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