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Market Outlook

The popular averages continued to the upside on Tuesday amid thin trading volume. The S&P 500 has been up six days in a row. Existing home sales slowed less than expected in March. Netflix (NFLX +7.0%) and Harley-Davidson (HOG +6.4%) both rose on better than expected earnings. Meanwhile, the prices of crude oil and gold both fell on Tuesday.


  In the American automaker sector on Tuesday, General Motors (GM +0.7%) announced a restructuring of its engineering department. Ford’s (F +0.8%) credit rating was affirmed BBB- by Fitch with outlook revised to positive. Tesla Motors (TSLA +7.0%) CEO Elon Musk personally delivered the first Model S’s to Chinese customers, while stating the company will build a car factory in China in a few years. He said the US location for the Tesla battery Gigafactory will be announced in a few months along with a likely partnership with Panasonic. See the video below of Musk being interviewed on the March 30th “Sixty Minutes” broadcast.


  Above is my three-month chart of the S&P 500 exchange traded fund (SPY). A late January drop pulled a lot of money out of the market after pundits cried that a bubble could burst. Heavy trading volume had been evident in the resultant bottoming formation during the turn into February. The up day on February 4 indicated a washout. Bottom fishers profitably entered the market on signs that the selling was overdone, at least for the intermediate term. The SPY then soared to a new high. The rise stalled for a while. Then the bounce after approaching the 50-day moving average in late March appeared encouraging, especially after again reaching new highs. However, the push downward on April 4 caused my outlook arrows to start losing their green. The rally on April 8 & 9  restored some hope. But then April 10 & 11 looked like repeats of April 4 & 7. The SPY’s fall through its 50-day moving average on heavy volume was not welcome to many, but appears to have created a buying opportunity.


   Note the similarity between the U-turn in January-February and this month. In both cases the SPY’s 50-day moving average was breached as Pied Piper pundits scared people into bailing out of the market. Once they were cleared away, rallies commenced and the 50-day MA was exceeded. Another rally as significant as the one in February may be underway.


DISCLAIMER: Our commentaries are provided as general information and not investment recommendations. You are responsible for your own investment decisions. Our opinions are based on historical research and data believed to be reliable. There is no guarantee that results will be profitable. We are not responsible for errors or omissions. We may hold positions in vehicles that are mentioned.

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