Daily Investment
Interpretations
December 19, 2008
2008-12-19:
Stocks marched in place today. The NASDAQ advanced
12 points (0.77%)
to 1,564, the Dow gave up
26 points (-0.3%)
to close at 8,679, and the S&P rose
2.6 (0.29%)
to 888. Oil dropped
$2.36, and gold
fell
$23.40 to
$837.40. The VIX
lost another
2.41 to end the
day at
45.
The continuing decline of the VIX is a bullish sign.
However, the market indices are recoiling from their... resistance
levels?... of around 1,600 for the NASDAQ, 9,000 for the Dow, and a little
above 910 for the S&P 500. A visit to the Minyanville village square
has been rewarded with two articles: and The first of
these two articles, The
Rally We've Been Waiting For?, suggests that "We might have yet
another try to reach the top of the channel, which remains in the vicinity
of the 940 target. Will that be the Santa rally we’ve all have been
waiting for?", but that, the pattern looks like the rallies in May
and in August a little before they broke down.
The second article, Dr. Prieur de Plessis's Greenback Down for the
Count?, observes that although the dollar may stage a relief rally
against other currencies, the downtrend will then resume.
The devaluation of the dollar is a subtle form of inflation, in that it
boosts the costs of imported goods, which, thanks to the outsourcing of
some U. S. manufacturing, is now an important part of our durable goods
buffet. Dr. de Plessis says of this: "On Tuesday, the Federal
Reserve signalled they were hell-bent on pursuing an 'inflate
or die' approach to rescuing the ailing US economy and fending off the
forces of deflation. The Fed is now inflating at a level possibly not seen
by a developed nation since Weimar Germany".
“'Either we are going to pay for our policy sins via
higher interest
rates or via a weaker dollar. And for an economy as
levered as the one in the US, the former choice is not an option,' said
Minyanville Professor Stephanie Pomboy. 'So a weaker dollar is the natural
valve'.”
Dr. de Plessis suggests that the precipitous fall of
the dollar shown in the above graph may give rise to a "relief
rally" or "dead-cat bounce" before it drops again. But he
adds, "Lastly, a sustained break in the uptrends of the US
dollar and the Japanese yen -- low-yielding currencies previously used for
funding risky investments -- should indicate that forced selling due to
deleveraging is starting to subside. As this situation plays itself out,
we should see a return of confidence and a calmer period for stock
markets
in general, and also some support for precious
metals and commodities."
"Lastly, a sustained break in the uptrends of the
US dollar and the Japanese yen -- low-yielding currencies previously used
for funding risky investments -- should indicate that forced selling due
to deleveraging is starting to subside. As this situation plays itself
out, we should see a return of confidence and a calmer period for stock
markets
in general, and also some support for precious metals and
commodities."
Mark Hulbert offers this article, 2009 Honor Roll- Bruised but bullish..
Peter Brimelow has provided this. Brimelow's Top Ten for 2008.
