Brief Market Forecast And Analysis:
This is an Interim Update. Earnings are beginning to weigh heavily on the market. The first quarter of this year saw a peak in corporate earnings and it has been downhill ever since. A general slowing of the economy, high energy costs, a strong dollar/weak Euro, and the lack of top-line revenue growth are beginning to have an effect on the bottom line of companies. I expected a rally in the second half of September to commence but a rise in energy costs and a tremendous rise in the strong dollar/weak Euro, derailed that. I am not becoming Bearish by any means, but most likely, the market’s lack of faith in corporate earnings will continue to weigh heavily on stock prices. However, if the intervention to support the Euro is successful and energy prices drift lower, then some of the problems pressuring earnings will be alleviated.
The pressure on the market is coming from a moderating economy. It appears that capital expenditures on technology, once touted as being immune to business cycles, are also affected by the overall economic slowdown. The slowing in capital expenditures extends all the way to the telecom equipment sector.
Another potential dark cloud hanging over the market is the huge amount of consumer debt currently being borne by U.S. households. The economic expansion has helped raise consumer debt payments to the highest percentage level of disposable income in history. The danger here is that consumer spending might significantly slow as more consumers reach their maximum credit limit and card issuers start to tighten lending requirements as bad debt mounts. I believe the current weakness in most discount stores are a symptom of this high level of consumer debt, which mostly affects low to mid income families.
I'm looking for the market to continue to trend lower until the Fed cuts rates or the earnings outlook improves. This is not a Bear Market yet by a long shot. Don't kid yourself. There is a lot of money rotating all over the place. The next Fed move is to cut interest rates IMHO. The Market desperately wanted some helpful guidance from the Fed this past Tuesday and when it did not get it, things got pretty ugly.
There is something that is puzzling me here quite a bit and it concerns the XAU. There is a lot of talk about how inflation is rising and growth is going to slow dramatically. Yet the XAU is hitting new all time lows on a daily basis. If a recession was truely going to be priced in here, the XAU would not be hitting new all time lows. What is taking place in regard to the Gold Stocks is more than a typical washout. If it was just a washout, I would be positive on gold stocks. But there is a lot more than meets the eye here and it is not good IMO for Gold.
I don't know what it is and I can't figure it out.
PS Almost no one knows anything about Gold. I know that I know nothing but some of the babbling fools on GPM think they know something by posting their bullish garbage and hype.
PSS Come back Hutch. You are the only one I've ever read on the Internet who understands something about Gold. Don't wait for the XAU to drop under 40 to prove your point. I know your out there and reading this. Bring some sanity back to GPM. |
