I am simply amazed at the market's ability to ignore the obvious and the fundamentals. Somehow, they are seeing Greenspan's testimony as positive and bad earnings as good news.
What I heard Greenspan say last week was we have zero growth now and we need a tax plan in place for two reasons. One I don't want the government playing the market with the projected surplus, but the other that no one has keyed on is he basically said the talking heads may very well be wrong and we may not be any better off or could be worse off the second half of the year and we may need that tax cut to spur growth after he has shot his wad and cut rates. Note that Greenspan was looking at factual data that growth has halted, this is not opinion but real tangible evidence. Note also that if we are at zero growth now, next quarter will likely be worse and it could be 6, 9 months or a year before we see a turn around.
They don't call the last leg down in a bear market the recognition wave for nothing. Right now everyone is in denial of where the economy is headed. That last push down could be a real doozy. As I said in my bottom call in December, this should prove to be a wave 4 push upwards or a counter trend rally. We still have wave 5 down to go sometime in the next couple months. I just think it is prudent to have a couple puts in the hip pocket just in case it comes earlier than expected.
If the Fed only cuts 25, we tank and we tank hard. That I am sure of. The uncertainty now is that it seems that the Fed may have their backs against the wall and may HAVE to cut 50 basis points. I didn't think they would until I heard AG's testimony this week. As I said, I think he is scared for the first time and since he is the more hawkish member of the team, the rest will likely push for 50 also. The Treasury market has also bet all but 100% that we will get a 50 basis point cut in rates so it seems a sure thing now. Assuming we get the 50, that is where it gets tricky. Will we rally more or do a buy the rumor, sell the news type thing. I don't know.
The next 6 months are likely going to be ugly economically. However you can't ignore history. Following a first rate cut, the market usually puts in a lower low about 3 months later or less. Following the second to third rate cut the market has ALWAYS been higher 12 months out. With the advent of the internet, online trading and the little guy getting timely news and being able to trade on it, we have seen the swings and results of economics take effect much faster than in the past. Therefore I have to wonder if we will accelerate upwards before stalling again or else dropping later when the slew of earnings misses and warnings hit next quarter. I have some things pointing to a new top in Mid February but the danger signs are also there shorter term that we could puch up into Wednesday then sell off so I am not letting my guard down here just yet.
As much as I hate the stock from an FA point of view, I had a buy on QCOM last weekend and it still looks good this week. I now have a weekly buy signal and it appears it could run all the way up into the low 90s. For a safer, slower play, XOM is looking good again. Oil is stabilizing in the high 29 to lower 30s and the oils make lots of money in that range.
Recall I have been saying to keep an eye out for new leadership. For future targets, EMLX, SFA, FLEX and SANM have shown they will likely remain leaders for the future. I am not saying to buy these right now just that these are some stocks that have held up better than most lately. NTAP deserves a look as it approaches it's bottom fork tine on the daily although the weekly shows it could push down closer to 50 before turning up. With EMC strong, NTAP should play catch up sooner or later even though they are both grossly over valued in the FA sense.
Remember, I am straddled here so I am not making any big wagers until the FOMC meeting is done and I see how the street reacts to the news.
Our indicator is hinting that we will climb early in the week then selloff the latter part of the week but it is very hard to read right now. The mid term trend however seems to be slightly upwards.
Some good finds by disu on the "NOTES" Page.
Message 15256488
Message 15256375
Another good read.....
biz.yahoo.com
Metals deserving another look here. With Greenspan's back against the wall and having to cut rates to spur spending in an attempt to avert a recession, it would logically devalue the dollar. This should be viewed as a necessary evil to spur exports so we can export our way out of trouble like Asia was able to attempt to do in 1998. The metals could act as a flight to safety for a devaluing dollar. The BOE Gold auction last week was 4.8 times over subscribed and as Gold has pulled back lately to 262-263 range, the mining stocks have held up thus far with HM, HGMCY etc showing good strength. Watch for movement here.
After a 20 year bear market in Gold, any thrust will be met with disbelief. Who knows when it will be for real. As stated in earlier posts and articles, there are many reasons why both the US Government and the Banks don't want Gold to rise but if they are forced to start covering, look out!!!
Good Luck,
Lee |
