MARKET COMMENT
December 8, 2008, courtesy of Dave Fry at ETF Digest
They’ve thrown the kitchen sink and the commode at markets. There isn’t anything they won’t do now. The next administration and their congressional cronies, long haters of the current administration’s deficits, are on course to outdoo-doo them. The new guy’s plan is to spend perhaps $1 trillion on a stimulus package. I’m just sayin’…
The US Fed and other central banks are pumping markets with liquidity and now major stimulus.
The Fed’s coupon pass on Friday, a mere bag of shells at $5 billion, injected more into those tendering junk FRE and FNM bonds in exchange for cash.
Today the Fed announced a proposed $44 billion bond sale. How they manage simultaneous buying and selling of this stuff is what put me to sleep during Money & Banking class in college.
The auto bailout bill is pending and perhaps is being reduced to a mere $15 billion which has Barney Frank disappointed. But, what the hell, once they give them that much, more will surely follow.
With all this stimulus and liquidity floating about the charge higher today was led in the US by tech, financials, industrials and materials. I wrote subscribers over the weekend that I was of two minds. Intuitive Dave felt a rally was at hand while Systematic Dave didn’t see that yet. Chalk one up for the Fryguy versus the HAL 9000. But, I follow HAL and the week’s not over.
Volume increased and breadth almost scored a 90/10 day but not quite per our man in Geneva.
Below is from our internal charts with DeMark weekly sequential annotations which have done a good job with 9 counts to demonstrate trend exhaustion.
XHB with DeMark weekly sequential annotations is below.
According to Lowry’s Research, there was 16 +300 point days in the previous bear market from 2000-2003. Is that relevant? Maybe, but it offers some perspective.
Let’s remember, it’s the season for a rally and with markets still much oversold on long-term monthly charts and money manager performance at a category below crummy [see WSJ hedge fund article HERE] and Morningstar YTD category returns below.
A symbol of hard times is hard whiskey and Brown-Forman noted strong sales of Jack Daniels bourbon last week. [I’ve got an extra bottle in the cabinet.] Are we suffering with hard times? No, it’s just I don’t want to be left out of the good parts.
We remain short-term overbought and long-term oversold. The markets are in transition. What are they moving to? I hope it’s not a trading range since they’re unproductive. GS I believe today forecast 975 on the S&P 500 as the upside target for 2009. That’s not a lot and indicates a potential trading range if they’re right. That’s a big if.
Let’s see what happens.
Have a pleasant evening.
Disclaimer: The ETF Digest has no positions…yet.
PS. Previously I’ve posted some snapshots from the nearby Cajas National Park about 20 minutes from Cuenca, Ecuador. Many liked the random photos. Here is where I was yesterday afternoon hiking through the area spying birds and trout. The hiking is strenuous since the altitude is around 9K feet.
I stop and take a photo of a cute little Chola girl staring at me.
