MARKET COMMENT
Dave Fry at ETF Digest, February 24, 2009
So, you’re tellin’ me there’s a chance? Bulls jumped on Bernanke’s testimony because they had to. My goodness, yesterday’s selloff put markets in a position to add a new leg lower not to mention how oversold equity indexes had become. He only stated that “maybe” the recession would be over this year. But, that’s all bulls needed.
Stocks undid yesterday’s losses in percentage terms if not in points. But, you’ll remember the various posts put up here yesterday noting the precarious levels where indexes were and especially how oversold markets had become. The bottom line on this Turnaround Tuesday, everything in fact reversed course.
Volume was higher than yesterday’s particularly on the NYSE where financials popped and breadth was the opposite of yesterday.
Meanwhile, our man in Geneva gives us his calculations of market internals. He’s been missed as we’ve been out of sync recently.
There’s another important technical indicator at work which I seldom post for the public. DeMark Indicators are pointing to a “9” reading for month of February. This often means “trend exhaustion”, which in this case, may portend some sideways movement or even a reversal. You’ll spot a decent “9” before from July. This has kept us on the sidelines in combination with other indicators like the RSI.
Well, that covers a lot of ground now doesn’t it?
The 1:15 Stick Save Express arrived at the station with no room to spare. The markets were in critical condition since yesterday’s collapse signaled a bear market much darker and deeper than even the most pessimistic bear previously imagined. But, one day of calm “happy talk” from the Fed chief does little to change the picture. The most important component in his talk was his calm approach rather than the gloom and doom from the administration. Perhaps the tone was comforting nevertheless he didn’t offer any convincing evidence that there would be growth in the spring of 2010.
What continues to amaze me is the misleading and outrageously false information reporters from supposedly reputable organizations like Bloomberg put out as fact. The past few days reporter (I use the term loosely) Daniela Silberstein has stated the PE ratio on the S&P 500 is only 10. “The S&P 500 is trading at 10.18 times the earnings of its companies after yesterday falling to 743.33, the lowest level since April 1997.” This is today’s quote from this morning’s report.
Based on trailing earnings? Forward estimates? What? She offers no details and when queried by email compounds the issue with this reply: “…ours is trailing earnings and 11.85 times estimated earnings.” S&P’s own website states clearly that trailing earnings now are 29.78 as of yesterday. What crap!
There’s just a few days left in the month and bulls are going to try hard to salvage something of the month to make you feel better. It’s what they do. But this volatile two-way action combined with oversold conditions keeps us on the sidelines for the most part.
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Disclaimer: Among other issues the ETF Digest maintains positions in: IEF, TLT, GLD, and GDX.
