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No Sell Signal Yet

05/04/2010 12:00 pm EST


Mark Leibovit

Chief Market Strategist,

Mark Leibovit, chief market strategist for, says the market’s momentum is still strong, and stocks will probably head higher in coming days.

Good news out of Europe, a decline in jobless claims (though it was still worse than expected), new [mergers & acquisitions] activity, and solid earnings reports [have] lifted the stock market [recently].

At the same time, the market has to digest another “outlier” event—this time coming from the Gulf of Mexico in the form of a major oil spill. An earthquake in Peru, the Icelandic volcano, a devastating earthquake in Haiti, and now an oil spill! I may have missed others. Those who are experts in market cycles and geocosmic events are telling me more is on the way.

I believe this market has more life left in it yet and no discernible down trend has been yet confirmed. Early May buying should buoy the market [this] week.

Transportation stocks [have] outperformed. The Dow Jones Transportation Average jumped 104.96, or 2.25%, to 4762.71 and hit a high of 4777.38.  (It closed above 4806 Monday, topping its bull market high—Editor.)

Gold should still be headed to or through the December bull market high of $1,225 [an ounce,] with potential to $1,350-$1,400 on its way to $5,000 in the years ahead. We've seen the US Dollar index track alongside gold and in euros, gold has blasted into new all-time highs due to the weakness of that currency.

The Treasury Department sold $32 billion in seven-year notes at a yield of 3.210%, attracting strong investor demand [last week]. Bidders offered to buy 2.82 times the amount of debt sold, compared to 2.79 times at the last four sales of seven-year debt, all for the same amount.

Downside risk now is approximately 10,750 in the Dow [Jones Industrial Average,] and 1,069 in the [Standard & Poor’s] 500. [This] week brings new 401(k) funds, which may be an offset. It also involves the “Sell in May and go away” theorists. The market will speak to us with regard to how well it holds support next week, and we'll get a better gauge whether a bigger top has now formed or not.

My gut feeling is that we're only going to correct a bit and then resume higher. The advance has been relentless, and the printing presses at the Plunge Protection Team are running 24/7.

True, the Goldman Sachs Group (NYSE: GS) story is potentially devastating. It all depends just how crazy [President] Obama and is advisors really are. Initially, my thought was that with all the key people infiltrated in the US (and other) governments from Goldman Sachs, such a siege made little sense.

On the other hand, it may only be a big show to “save face” among critics. If Obama truly wants to bring down Goldman Sachs, then I'm afraid, much like the Lehman Brothers collapse, it will presage a huge market correction. All we can do is wait and watch.

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