Market Summary

Not a pretty week, month, or for that matter the YTD numbers either. We have had a string of bad months that made the year 2008 look like it fell off a cliff. and so far this year looks like more of the same. The numbers below tell it all, almost everything is red. When will it stop? Well the 1929 crash didn’t end until 1932. Lets hope our recovery starts a little sooner. Click on table to enlarge.

I am including the YTD performance of the sectors. A bright spot is the fact that technology is comparatively one of the least down in the list and that is reflected by the Nasdaq market. As the Nasdaq is generally considered to be the leader of market direction the fact that it is down the least is a good sign. Click to enlarge.

Market Summary

Not a pretty picture in the markets this past week. Financials were hardest hit down over 15% for the week. Bank of America made new lows at 2.53 and Citigroup made new lows at 1.61. XLF, the financial sector etf, made new lows of 6.85. Gold, on the other hand, sparkled. Closing at 1002.20 gold is quickly approaching its March 2008 high. Back then because of financial concerns it rose to an all-time trading high of $1,014.60 an ounce on March 17, 2008.

This past week President Obama signed into law the $787 billion stimulus plan, the American Recovery and Reinvestment Act. He also revealed his housing plan to stop foreclosures. While the markets did not rally it is hard to imagine that all this stimulus will not have some effect. Friday saw a key reversal day in the US dollar which closed at 86.49. The dollar has been rallying since the 2008 lows at the 70 area but has made a double top at the 88 area. Since the stock market and the Euro have moved in the same direction in the past a decline in the dollar may signal a move higher in the stock market.

We are at critical areas and if we consider the November lows to be 3rd wave lows and the rally off those lows to be the 4th wave in the Elliott wave pattern then the 5th wave can be considered to have begun with the highs made in early January 2009. The 5th wave lows, then, will be the bottom of the cycle and should come in very close to the 3rd wave (November 2008) lows. We are at that level in the Dow and testing that level in many other markets. My feeling is that we could see a significant rally soon once we have made the lows and this will be accompanied by a fall in gold and the dollar. And while I feel the rally could be significant it would still be an intermediate term trend move against a larger bear market and as such would be a bear market rally. Which way the markets go we will just have to wait and see. Click on table to enlarge.

I am including a view of the performance of the sectors for this past week. As noted above financials were the worst performers down over 15% and Conglomerates also did poorly. Click on image to enlarge.

I am also including a view of the Dow showing the wave count as I see it for the last 6 months. As can be seen the Dow made new lows below the November 2008 lows and is thus in an area I would call a 5th wave zone. Click on chart to enlarge.

Happy Valentine’s Day!

May the whole world be blessed. Teach only love for that is what you are.

I.O.U.S.A.

David Walker served as United States Comptroller General and head of the Government Accountability Office (GAO) from 1998 to 2008. Appointed by Bill Clinton, his tenure as the federal government’s chief auditor spanned both Democratic and Republican administrations. While at the GAO, Walker embarked on a Fiscal Wake-up Tour to alert Americans to wasteful government spending. Walker left the GAO to head the Peterson Foundation in March 2008. The Foundation distributed the documentary film I.O.U.S.A. from which the video clip below is taken. It is 30 minutes long and well worth watching.

Market Summary

After four down weeks this last week ended positive. Technology was the big winner as far as sectors are concerned and the technology heavy Nasdaq was up 7.8% for the week. When the Nasdaq and the Russell small cap index lead the market to the upside that is a good sign. Both indexes are now trading above their 50 day moving averages.

Friday was a big up day in spite of the fact that the unemployment numbers came out with almost 600,000 people losing their jobs in January. When the markets go up in the face of bad news that is also a good sign. But why did the markets rally? Because of the hope of a financial bailout by the government. We are in a deflationary environment and the government is desperately trying to avoid a deflationary collapse and stimulate inflation. However, with huge job loses each month that will be difficult as consumer spending is likely to be depressed. Short term rally’s are selling opportunities. Click on table to enlarge.
The performance of the sectors is shown below for the past week. As can be seen it was a good week overall. Click to enlarge.

Market Summary

This last week started bullish and ended bearish. Monday and Tuesday were good days in the market giving rise to a pop up higher on Wednesday which looked like a breakout to the upside. That all changed on Thursday with a steep sell off to the downside which continued on Friday. This type of market is what is known as a bull trap. The market rallies and sucks people in and then takes it all away. Part of the reason for the rally was in the financial sector which shot way up on talk about the creation of an Aggregator bank or so called “Bad Bank” to take off bad assets from the banks. I think we will hear more about this and it has the ability to move the markets.

The table below shows the UGA, the US Gasoline Fund ETF, was up 7.78% for the week followed by GLD, the gold ETF, up 2.02%. The worst performer was USO, the US Oil ETF, down 9.59%. The trend as I see it in the markets is to the downside. If we break last weeks low the next support is around the 800 area on the S&P 500. We will just have to wait and see. Click on table to enlarge.

Market Summary

This last week saw gold shoot up by over 10% followed by oil which was up over 7%. All the other indices on the table below were down for the week. The US dollar index continued it climb back up to its recent highs and shows signs of strength as the global recession has led to the exchange of foreign currencies for the US dollar. The UK last week declared that it is now officially in a recession.

Where are the opportunities? Gold continues to shine. As a safe haven currency it is holding up as other foreign currencies decline and the global economy slows. It closed at 897.70 and above its long term 200 day moving average of 853.33 while only 3% of the stocks in the S&P 500 are above their 200 day moving average. No doubt there is a flight to safety as fear about the state of the economy spreads and as concern about the possibility of inflation remains. The CRB index, a measure of inflation based on the price of 19 commodities, appears to have made a bottom after a long decline. However, with a slowing economy it is hard to imagine that the price of commodities will be rising. Also, we will have to watch bond yields which travel inverse to their prices. There appears to have been a bubble in bonds which pushed the yields to very low rates. Now that the rates are rising ETFs that go up when bonds go down may also shine. We will just have to wait and see. Click on table to enlarge.