General market comment -- Oct and Q4 forecast
Don, now that the month is over, I'll take a little bow:
Sam, you have been very prescient.:)
<<There might be a day or two in early Sept where the market swoons, and it is certainly true that I've been wrong plenty of times before, but--I think Sept might fool a lot of people who are waiting for a huge down move after Labor Day.>>
Message 26800545
September turned out to be the best Sept since 1939:
The Dow gained 7.7 percent in the month, making it the strongest September since 1939, at the dawn of World War II. However that runup followed a dismal August, and the Dow is still only up 3.5 percent for the year and is 3.7 percent below its closing high for 2010 reached on April 26.
I think expectations are still so so low for the economy and returns on interest bearing investments also so so low, that every piece of good macro economic news will be met with buying at this point. Especially on the employment front, but really everywhere:
Traders were initially upbeat Thursday after a reading on regional manufacturing in the Chicago area jumped in September. Economists had expected the Chicago Purchasing Managers Index to fall slightly. That regional manufacturing report bodes well heading into Friday's monthly report on national manufacturing activity from the Institute for Supply Management.
"The jump in Chicago PMI was nothing short of shocking," said Nick Kalivas, vice president of financial research at MF Global. "It was complemented by the drop in (unemployment) claims."
finance.yahoo.com
We have begun to get a steady dose of mildly good news, and I think it will continue and plausibly even ratchet up. There is still a lot of bearish sentiment out there, but people really want to be bulls. There was an article on a bear a couple of days ago in which he admitted being wrong about Sept, but moved his bearish prediction out to October instead. The bears have sold already, there is plenty of cash on the sidelines still hungry for decent returns, and every time we get good economic numbers, a few more people get converted to bullishness, and put some of that money into the market. At some point, the fear and anxiety about the economy will just fade away, and we will have an explosive melt-up in the market.
Even the semiconductor stocks--believe it or not! In fact, my guess (FWIW) is that semiconductor stocks will lead again at some point with a huge move up. Things are not as bad as they are painted to be, IMHO, there is still steady growth--slow in PC Land, but steady nonetheless. We might have to wait a few months, but it will happen. Q4 visibility won't be very good, so Mr. Market may (emphasize that word) take technology companies down post-earnings on that score, but at some point--perhaps as soon as Nov post-election, perhaps not until Dec, Mr. Market will start discounting a better than currently feared 2011, and will begin going up again. And the SOXX will finally break out of this incredibly frustrating trading range and mid-to high single digit PE, and will scale past 400 again (which, back in June, I thought would happen in July-Aug, just to keep the record straight by mentioning a prediction that was completely wrong).
All JMHO of course. |
