Whenever I feel afraid
I hold my head erect
And whistle a happy tune
So no one will suspect
I'm afraid.
Are the markets bottoming here or are we being hopelessly optimistic?
The markets have indeed been terrifying since mid-May and we have to keep checking our premise to see if we are blowing off our problms or if we are fighting the tide with good reason.
Obviously, the crux of my bullish premise is that oil and pretty much nothing but oil is killing the economy. Yesterday's action did nothing to shake me off that premise and, looking at the past 5 days' action: It is very clear that oil goes up and the Dow goes down, oil goes down and the Dow goes up. I firmly believe that $140 oil is unsustainable therefore I think that Dow 12,000 is also unsustainable but it is sooooooooooo painful to hold onto our bullish positions while we wait for things to "normalize."
We ran the Big Chart last Thursday, where we had just made some great gains based on the ADP report but I was concerned at the time that the government jobs numbers would not support it and they didn't but I'm a little taken aback by how far we've fallen since then.
|
|
|
Week's |
25% |
20% |
Feeling |
200 |
|
Index |
Current |
Move |
Terror |
Horror |
Better |
DMA |
| Dow | 12,141 | -463 | 10,644 | 11,354 | 11,808 | 12,947 |
| Transports | 2,480 | -249 | 2,336 | 2,491 | 2,591 | 2,706 |
| S&P | 1,339 | -65 | 1,182 | 1,261 | 1,311 | 1,421 |
| NYSE | 8,947 | -461 | 7,790 | 8,310 | 8,642 | 9,446 |
| Nasdaq | 2,404 | -145 | 2,146 | 2,289 | 2,380 | 2,511 |
| SOX | 383 | -34 | 419 | 447 | 465 | 409 |
| Russell | 719 | -44 | 642 | 684 | 712 | 744 |
| Hang Seng | 23,023 | -2232 | 24,000 | 25,600 | 26,624 | 25,625 |
| Nikkei | 13,888 | -453 | 13,725 | 14,640 | 15,226 | 14,675 |
| BSE (India) | 15,250 | -519 | 15,900 | 16,960 | 17,638 | 17,619 |
| DAX | 6,714 | -227 | 6,088 | 6,494 | 6,753 | 7,291 |
| CAC 40 | 4,672 | -235 | 4,626 | 4,934 | 5,132 | 5,228 |
| FTSE | 5,790 | -205 | 5,066 | 5,403 | 5,619 | 6,160 |
The Transports drove off a cliff, diving 10% for the week against a $10 rise in oil. Transports fell so far they added 3 red boxes, dropping all the way back to our "20% Horror" level (how far they've fallen off last year's highs). You may be surprised to know that the Dow, the S&P, the NYSE and the Nasdaq are ALL still ranging in our "Feeling Better" zone and that's why it's important to do these weekly charts – it helps keep things in perspective…
The SOX are still hopeless and we got more bad news this week so they're not likely to come back soon but Hong Kong fell 10% this week and Japan and India fell 3% and Europe fell 3%+ so WE ARE LOOKING PRETTY GOOD BY COMPARISON!
Let's remember my overriding premise for the year is that US markets will be the "least sucky" place to put money in 2008. We expected the global economy to suck, we expected runaway commodity prices to cause a global crisis and we expected the dollar to bottom out. Well check, check and check! Things are going according to plan and it's time to buy.
I'm not saying we should rush in and put is all on the buy side but I'm ready to begin to move off our 80% cash position for the first time all year and put some capital to work. There are a lot of really good companies being given away right now and it's time for us to flex our long-term investing muscles. This is timely as we will be doing our major annual Long-Term Virtual Portfolio Review next month but I'm starting the process this weekend as I think the tide may be turning sooner than we think.
I know it's scary out there and we may have a little further to fall as investor panic is a palpable thing and we still haven't had a really good capitulation day but we have had a 1,000-point drop since May 19th and, as I said the other day, I'm just not willing to accept that this market is worth less in 2008 than it was in 2006.
