Weekly Market Update - New quarter off to a good start

Weekly Market Call

In spite of there only being four trading days this week, the market made the most of them, tacking on a good 1.5% and nearly erasing the losses that began in late February.

Major drivers this week included: falling oil prices when Iran released the British hostages, more M&A activity with Kerkorian bidding for Chrysler and a reported .7% increase in February pending home sales.

On the other side of the ledger, the ISM services index number indicated that services were joining manufacturing and housing in this year's slowdown. Indeed, weak factory orders were also reported this week.

On Friday, March payrolls came in with a gain of 180,000, a bigger than expected gain. This will add fuel to the bullish fire as it supports the notion that the consumer will continue to support the economy even if business spending continues to slow. Along with payrolls, it was reported that hourly earnings were up another .3% in March. This coupled with a recently reported decrease in productivity has inflationary potential. In general, the positive data for workers means that it can be assumed that there will be no interest rate cuts anytime soon.

Nothing has occurred since February to change my opinion that the economy is slowing. Why the market has returned nearly to its 52-week highs is beyond me. It is true that the economy is not falling off a cliff but do we deserve the rising valuations we see today?

ETF Comments

Indexes - all of them (and their associated ETFs: DIA, SPY, QQQQ, IWM) were up this week. They are all clawing their way out of the TradeRadar SELL zone where they have been stuck for the last month or so. IWM and SPY are the strongest, DIA is the weakest and the QQQQ is the messiest but they have all turned in strong performances in two of the last three weeks.

Commodities - Oil fell to $64.28 after the British military personnel were released by Iran and the US Oil ETF (USO) fell accordingly. USO is now flashing a short-term SELL signal but on a longer term chart, it still seems to be in an up-trend. The Energy SPDR (XLB) remains in a solid up-trend and tacked on more gains since last week.

Technology - The SPDR Tech ETF (XLK) peeked out of the TradeRadar SELL zone last week and this week completed a strong move out that positions it back in the box where it had been trading sideways in much the same manner as the QQQQ.

Housing - the SPDR Home Builders ETF (XHB) at least stopped falling this week. Saying that there had been strength would be going too far. The iShares REIT ETF (IYR) was up over a point from the previous week but is still in the TradeRadar SELL zone. IYR is still below its 65-day moving average and after this week we have now seen a lower high develop. The trend here is still down as IYR failed to recover to anywhere near its pre-downturn level. As mentioned last week, it may not be too late to do a little hedging with SRS, the ProShares inverse real estate ETF.

Biotech - XBI, the Biotech SPDR, had a strong week and is probably over-bought on a short-term basis. XBI is now positioned to reversed the intermediate down-trend that has been in place since last November.

Financials - the SPDR Financial ETF (XLF) gained only a few cents and, as I said last week, continues to display one of the strongest TradeRadar SELL signals though it manages to stay above its 200-day MA. I can't tell if XLF is over-sold or ripe for another downdraft. In week when the market was strong, XLF barely budged - not exactly a ringing endorsement for the financial sector. Could be another hedging opportunity here; putting a few bucks into SKF might be a good idea.

TradeRadar Stock Picks

Generex Biotechnology (GNBT) is pretty much doing nothing so we continue to hold. This week it closed at exactly the same price at which it was recommended.

The NASDAQ 100 was up nicely this past week so the ProShares UltraShort QQQ (QID) got slammed and closed the week down at $51.55. Our short-side pick swung from a 2% gain last week to a 2% loss this week. The QQQQ is looking stronger lately but is just barely peeking out of the TradeRadar SELL zone. With another earnings season coming up in a week or two and expectations being low, it would not surprise me to see QQQQ slide solidly back in the SELL zone soon. And so we will continue to hold QID a little longer to see how this plays out.

Cisco Systems (CSCO) was up and closed the week at $26.06 so we are back in the black again with a 1% gain.

BigBand Networks (BBND) was up half a buck to close the week at $18.51. We are now sitting on a 6% gain.

SanDisk (SNDK) came back a bit from last week's weakness and managed to close at $44.50. Our gain has increased from 1% to 2.6% and it remains solidly in the BUY zone.

Our latest pick is Millicom International (MICC). They were recommended at $79.30 on Tuesday of this week and finished the week at $83.30 for a 5% gain. I usually try to pick cheaper stocks that are undergoing a reversal in trend. This one was picked as a suggestion for the CNBC Million Dollar Portfolio contest and exhibits a strong intermediate up-trend, a large market cap and a high beta. Read about it in a prior post.