Week of February 16th, 2009

Weekly review of the markets

Last week. The week before last the graphs were not bad with the Nasdaq breaking higher but all hope lied on the financial and economic rescue plans being accepted and fulfilling investors expectations. The week ended on hopes the plans would be concluded and accepted over the weekend.

Monday. we learned we wouldn’t know what the results of the rescue plans would be before the next day and no important economic news were on tap so the market didn’t go anywhere all day forming a candle called a doji which usually is a break before the next move up, or down.

Tuesday. no significant economic news at the open so all we had left to do is wait for the announcement in the afternoon. The financial rescue plan came out but it seems investors didn’t like it because there were not enough details as to how it would work. The devil is in the details. In fact the impression was that the treasury still had no idea what to do! The doji finally had its effect and since the markets moved up recently on hopes of a better plan, the doji preceded a sharp decline.

Wednesday. the day started the same way it ended the day before drifting lower until the Obama recovery plan was announced. Although there were no surprises it was still a colossal announcement with a little less than $800B dollars destined to stimulate the economy, so people with short positions decided to cover which helped the market close higher on the day.

Thursday retail sales increased by 1% when the expectation was a 0.2% decline. This represented the first rise since July 2008; but it didn’t impress the market one bit as it still opened lower and remained lower until another government announcement turned the trend up to finish higher again. This news was the one about the help finance troubled mortgage loans.

Friday the consumer sentiment index continued to drop (56.2 vs 61.5) but this obviously didn’t surprise anybody since the market remained unchanged most of the day. This emotionless attitude continued through the announcement that the house of representatives approved the Obama plan. Now we need to wait for the Senat. In the end the week remain pretty much unchanged even though it seems all the plans will be accepted.

It is now clear that investors are far from being convinced the extraordinary measures taken to rescue the economy will be sufficient. That being said everybody expects the market to bounce hard, soon, but the question is when and what will it take? It’s like a group of 100m dash runners waiting for the signal while the starter is fumbling with the gun: They know it’s coming and they’re impatient but they still can’t go until the real signal is given. Some are trying to anticipate the signal but they are simply causing false starts. Anyways, you get the drift. -)

Next week is a shortened week and some interesting economic data is underway so check it out further down in this report.

Technically. only the Nasdaq seems to be holding up and giving us hopes that we might be close to a rebound but the overall trend is still negative.

Nasdaq:

The Dow clearly broke out of its triangle and the post recue plans activity occurred outside of it.

And finally, the S&P500 still didn;t break out but it’s really close to it.