Another fine post Earlie!
I had a good week also. After considering the charts a bit last night, I don't think we're done with down, for a lot of the reasons you pointed out. In addition, the PPI number could have HUGE implications for the Fed's willingness to increase money supply with abandon. Inflation is not dead, it just came back from vacation and its ready to go to work on the economy!
The consumer is tapped out, worried and pulling back. The reason sentiment fell off a cliff is that J6P KNOWS he's in debt up to his eyeballs, much more so than when going into recessions in the last 30 years (including '73-'74 and '80-'82). As Doug Noland pointed out eloquently in yesterday's Credit Bubble Bulletin, it is absolutely stunning to see mortgage refinancings (in which equity is being pulled OUT) and the subsequent increase in debt issuance zoom to the stratosphere even as other economic indicators (and other lending activities) plummet. A true sign and a warning to all who will listen.
I've rethought my "asset allocation" a bit. I think IF we don't bounce immediately on Tuesday, there's even a small chance of an unmentionable event occurring. Very important to have some kind of crash insurance in place, I'm looking at OOTM index poots, and already have a fairly large Dow poot position in place. If we bounce, I have no doubt it will be brief and could be ended as soon as the next set of CPI numbers come out on Wednesday. It's certainly no time to be loading up on kinky tech....but I've noted increasing vulnerability in traditionally defensive issues as well. Drugs, for example, are not cheap (and SGP's mini-crash should serve as a warning to those who want "defensive at any price). CAG also got blasted, largely due to an energy related profit shortfall. I think we may be "broadening out" to the downside here, 2nd quarter warnings period is right around the corner, and the PE on the S&P is at 24. I agree that corporate indebtedness will be a major point of weakness to attack, a la Lucent. The third stage of the bear is coming to a market near you (in your case, very near if you're Canuckistanian!)
Regards and have a great weekend!
Patron
p.s. Very nice call on the opticals last week, you nailed 'em cold! |
