Market Summary

The S&P 500 rose 4.9% this week. By our reckoning, that's its biggest weekly gain since April, 2001, measuring from the Monday open to Friday close. While that may seem impressive, remember that April 2001 was the middle of a bear market that didn't end until September 2002. The following chart shows the period January 2000 - December 2001 with the promising looking April rally that took the index from the bottom of the 2 s.d. Bollinger Band to the top before the slide resumed in May. Note that the rally took the index above the 50 dma but not the 200dma. It was also only one of many rallies that failed before the turnaround came in September 2002.

As we look at the weekly chart of the S&P 500 as of yesterday, we see a similarly strong rally, but it is impossible know if this is the bottom or a head fake such as in April 2001.

We continue to think that the Administration will do all in its power to avoid a market collapse this year. In 2001, the bear market could be blamed on the previous Administration. The stimulus package enacted then was no where near as powerful as the one being considered now. It was the beginning of the Bush Presidency with plenty of time to recover. Now there is no one else to blame and the legacy is at stake, as well as the election of a Republican President in the fall. The measures taken so far show a strong resolve and further measures can be expected to avoid a market collapse and recession. The jobs data reported on Friday show that a recession may be already upon us, but if the stimulus package is enacted swiftly and the bond insurers are successfully bailed out then we may have seen the bottom.

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