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Many investors have rightfully asked  Is this the beginning of a bull market rally or just a bounce from the devastation weve sufferred over the last 9 months.  Do we first have to retest the November 08 lows or did the March 09 lows already do that?
  
Theres perhaps nothing worse for ones confidence whether youre an investor or an advisor to have lost
20, 30 ,even 40% of your investments  or more over the last year and then to get back into the market only to have it trick you again with a new bear market correction.
 
So what can we do to protect ourselves and the money we have left from further losses.  Some people say well have to retest the March 09 market lows. Others say well have to wait for the housing starts to pick up.  Still others say dont do anything until unemployment levels off. Some are waiting for the retail sales to increase yet others are awaiting the looming retail credit card crisis which many experts have predicted is only around the corner.
 
One thing is for certain NO ONE has the correct answers nor knows when it will occur.  Perhaps the correct indicator is a combination of the following  easy to identify indicators which can be easily measured once a month on your computer screen. Let me explain. 
 
Many managers of large Companies begin to feel positive about the future prospects for an economic recovery and growth in their industry when they see excess inventory begin to be absorbed. This in most cases is a sign that business is starting to pick up. The best way to check this is with the Data that many managers themselves rely on and that’s to check the “Institute for supply management Index”.  You can find that data which is updated monthly at www.Ism.ws. The rebound is real when the Non Manufacturing Index number reaches 50 and stays at that # for at least 2 months. Prior to last Septembers downturn the number was 49.2 however during the months of Feb 09 it was 41.6 during March it was 40.8 and the recently released April Numbers came in at 43.8. The numbers are released during the 1st week of each month.
 
Before business picks up many companies first hire temporary or part time employees and  as new business sustains itself they then turn to  hiring  full time employees .A good indicator of this trend can be found at  www.americanstaffinf.net  click on staffing statistics which shows weekly changes in the number of temporary workers. Many managers feel theyre on the road to recovery when they see at least 12 weeks of  a consecutively rising trend. The index has stayed stagnant since February .
 
Since the real estate collapse is what led us into this current recession many feel we cant begin to say its over until housing turns around and the current inventory begins being used up .
    
The best way to do that is to check the National Association of Realtors web site www.realtor.org  click on Research. Check the supply of unsold homes , Last month the number was 11 months this months its at 10 months, when it gets down  to 6 months that’s a strong sign that were on a way to a recovery.
 
No one likes to feel helpless and always having to rely on other people for their guidance as to what to do. Im merely  offering these 3 indicators as a guide to give you the individual investor a small measure of control as to what you should look for in addition to all your other sources of  information as to when you could rightfully feel  that  the “Rally is for Real ”
 
As always  Good Luck!

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Tags: bull market, henry montag, housing market, investing, market rally, market recovery, stock market

About the Author: Henry Montag is an Independent Certified Financial Planner as well as a CLTC. He’s been in practice since 1976 with offices on Long Island, New York. He is a contributing writer for The Moneypaper, a national financial publication, been my sourced by Investors business Daily, Long Island Business News, Newsday, Wall St Journal, The Moneypaper,Investment News, Senior Lifestyles and has held insurance and securities licenses for over thirty years.

This entry was posted on Tuesday, May 26th, 2009 at 9:53 am and is filed under investing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.