Daily Investment Interpretations

July 31, 2008

2008-7-31:  The Nasdaq fared well today, dropping only 4.17 points to 2,325.55. The Dow plunged 205.67 points to 11,378.02, erasing yesterday's gains. The S&P 500 index fell 16.88 points to 1,267.38 points after yesterday's 21-point run-up. The VIX climbed 1.73 points to close at a more-healthy 23 (22.94). Meanwhile, oil fell back to $124 a barrel. What torpedoed the markets is, evidently, that the revised GDP for last year's fourth quarter was negative, consistent with a recession, while the second quarter's initial GDP was lower than expected, at 1.9%. The revised growth for the first quarter of 2008 was 0.9%. Despite the seemingly good 1.9% growth rate in the second quarter, gross domestic purchases fell 0.5% and imports dropped 6.6%. Also, the 1.9% growth rate for the second quarter included the effects of the government stimulus package, which won't be as effective in the third and fourth quarters.
Late-Breaking News:  Mark Hulbert has just published: Russell turns bearish again. Richard Russell is the author of the Dow Theory Forecasts, and has a 60-year history in the stock market, as well as a good long-term track record. One reader's comments concerning this article are reproduced below:
    "Let's see, as I recall, Mr. Hulbert and Mr. Brimelow heralded Russell's statement last Sept./Oct. 2007 that the Dow Theory had just confirmed a major BULL MARKET. That was just before the market began a significant BEAR MARKET trend. Now he is declaring that the market will decline from here.
    "I also seem to remember that Mr. Russell had been saying that the market was in a downturn since the last bottom in 2003 before he declared a bull market last October. His subscribers missed out on one of the best Bull markets in our lifetime during the mid-2000s, and he finally called for a bull market right at the top. I use his predictions as an excellent contrarian indicator. We must be close to a bottom."