January 2010 Monthly Review
January 2010
Monthly Review:
The 10-month robust rally we witnessed in the US equity market came to an abrupt end on January 22, 2010, sending the major averages back into a serious correction. Not surprisingly, the US dollar rallied smartly last month and closed back above its 200-day moving average (DMA) line for the first time since April 2009. The stronger dollar sent US stocks and a slew of commodities lower last month (more on that below) for their worst monthly decline since February 2009. In addition, investors remained concerned that the effects of the massive worldwide stimulus packages from 2008-2009 are beginning to wane and the future of the global economic recovery may not be as robust as initially expected. This robust 46-week rally was a bit odd in nature since it helped send the major averages to one of their strongest 10-month sprints in history and did so with only a dearth of high quality leadership participating. It is important to note that so far since that rally began, none of the major averages have pulled back more than 8-9% before the bulls showed up and sent prices higher. It is also important to note that since the March lows, the major averages have retraced (rallied back for) approximately +50% of their recent bear market decline, which is a fairly typical bounce before a new down leg ensues.
Earnings & Economic Data: B
Before we discuss the market’s action, let’s analyze how the market’s have reacted to the latest round of earnings and economic data. So far, the market has responded poorly which is not a healthy sign. The Labor Department said US employers slashed -85,000 jobs in December which fell short of the Street’s unchanged estimate. Meanwhile, the unemployment rate held steady at -10% which is near a 26-year high. However, November’s reading was revised to show a gain of 4,000 which was the first time US employers added jobs in nearly two years. Since the recession began, the US has lost 7.2 million jobs which is the largest on a percentage basis of all jobs since World War II ended in 1944-45.