WEDNESDAY:
All you heard about on the financial stations was how bad things are. The hedge fund issue dominated the news but stagflation was resurrected again. We are not wild about what we see in the economy; that demand leading supply is causing a lot of problems with inflation, and that can be the root of many evils. We even wrote about stagflation earlier in the year when we first saw really endemic inflation. This here is not stagflation. It is not a great trend we see, but it is a long way from stagflation.
CSCO beat the street after hours and was higher, but not enough to make a difference. Indeed, CSCO won't make a difference to the market Wednesday, because its paltry earnings report, even though it beat the street, is not going to change the fears of oil, the Fed, and now a hedge fund implosion. Those are some major headwinds, and they make this rebound look quite feeble as it attempts to hang on.
Thus we approach with caution. We think the Tuesday drop was still part of the consolidation of the recent move off the lows and is still working to make another move higher. The market is going to have to look beyond the current issues, what it typically does when it is ready to move, and it was not doing that Tuesday. At the same time it did not clearly roll over. Looking for some more downside but then a reversal to start the next attempt higher. |
