11000 and Beyond

exportsYesterday, we breached that critical 11000 mark for the Dow. Today, we were able to combat a selling opening and sustain above 11000 levels for the time being. Buying was sparked by a strong by a report of rising prices of imports as well as an increase in exports. As a result, many analysts are revising 1st quarter GDP growth estimates to around 4%. Cramer (how valid can his opinion be right?) is as bold to say that he expects a "prosperous economy" by the end of the year. At any rate, there is a definite division of economists regarding the future of the economy. If I were to take a snapshot of my local economy (Southern California), I would say that we are not out of the woods yet.

There have been many glimpses of good this past quarter and there should be. The money that is circulating the economy is record setting. Businesses and consumers have the opportunity to credit more than they ever have been able to for taxes, and interest rates have been record low for home buyers. So is this our doing or the government's artificial hand? That is where much of the debate lies. Whatever it may be, the market will continue to move and I hope to be on the right side.

Lately, things have been working well for me. Retailers have been gaining since I purchased some select retailer stocks, the dollar has held up nicely, and the Yen continues to struggle. Although my portfolio continues to remain rather "lightly" invested at this point, for the most part, these moderate investments are yielding quite nicely. Plus, I can go to sleep peacefully knowing that much of my portfolio is in cash.

I do believe we have potential to push further at this point, as our current good times are sure to push further and cause for some more positive data points. I do, however, feel that many of these levels will be unable to sustain. Cramer believes that the stock market can be manipulated just by convincing everyone that the recession is over, resulting in people buying again. However, fundamental economic factors need to change before a authentic recovery can be made. Those changes have not occurred and if it were not for the government's massive intervention, we would be worse off than the Great Depression.

For now, I will continue to ride the rally train. At this point I cannot clearly say where I believe contractions will begin to show, but I will be very cautious heading into late 2nd quarter and early 3rd. Home builders are also presenting an opportunity for returns at this point as new housing starts are looking to get bumped up. All of this government money is benefiting businesses like Lowes and Home Depot. My hope is to not get caught on the wave. Happy Trading.


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