Asleep at the Wheel

By Jerry Slusiewicz | April 08, 2008 | 2:27 PM | 0 Comments

The overall markets seem to be in some sort of funk for the last week and a half. The major indices have been rising well enough, however it has come with paltry volume. There is an overwhelming hope that the bottoms in prices for 2008 have been set, but the market is stuck in a trading range with a top of 12,800 on the Dow Jones Industrial Average's and 1,400 on the S&P 500.

Until the markets break out above this trading range there is still a lot of risk for investors. We are now entering earnings reporting season for the first quarter. Obviously the financial sector will be stuck in reverse with negative reports across the board as companies work their way through their mess of alphabet soup, problem paper. Whether or not all companies come clean with a final write off, may determine the direction for that sector going forward, but as the previous numbers are released it won't look pretty in the rearview mirror.

The bigger factor for the market will be the other nine major sectors of the economy and how those corporations fared in the first quarter. There is much talk that the downturn has been contained to just the housing and financial sectors. That would be nice, but it remains to be seen. It would seem almost naïve to believe that problems in the financial sector wouldn't spread across the spectrum. As the old adage says, "Money makes the world go round."

Hopefully the earnings surprises happen to the upside and the market takes off, accompanied by heavy institutional volume. As fellow GF contributer Bruce Zaro recently penned a Dow break above 12,800 would be big. However, the last several trading days do not indicate that it will happen on this run. We may need one more consolidation to build up momentum for the big lift.

Seasonally we are late in the game. For this cycle the ‘Sell in May and go away', is something that we hope doesn't hold form as it has many times in the past. We have been in a downtrending market for the past five months. The market needs a catalyst to reverse that. The obvious candidate is strong first quarter earnings from a broad number of sectors and companies. Until that happens patience is a virtue.