Daily Investment Interpretations

November 11, 2009

2009-11-11: After touching higher highs earlier in the day, stocks closed modestly up, with the S&P 500 and the Dow posting new records for the year.            
   
The NASDAQ Composite moved up 15.82 points, (15.82) to end at 2,168.90, the Dow extended yesterday's gains 44.29 points (0.43%) to end at 10,291.26, and the S&P 500 ended 5.5 points (0.5%) to 1,098.51. Oil added 23 to $79.28 a barrel, while gold hit yet another new high at $1115. The VIX rose 0.2 to 23.04. 
    Today's action, like yesterday's, is predicated upon the Fed's good words yesterday. The fact that the Fed isn't worried about inflation and will keep interest rates at 0% indefinitely removed barriers to higher stock prices.
    Among today's articles: History lesson: Buying stocks in 1982, which points out the fact that there are striking differences between the present situation and the circumstances that prevailed in August, 1982, at the end of 16-year secular ("super-") bear market, and the beginning of the 1982-2000 super-bull market. Bulls seek hope in history observes that volume has been steadily falling as the market has moved higher. (Today was a holiday for most U. S. citizens, so volume might be relatively low today for reasons that have to do with holiday trading rather than with a lack of interest in stock acquisitions.)
    The S&P 500 should touch at least 1,120 if this wave is to emulate prior waves. If it doesn't, then its failure to do so will probably signal at least an intermediate-term top.
    The market indices have risen quite rapidly since March without a single 10%-or-greater correction. If this upwelling turns out to be a cyclical bull market, then there will probably be a  10%-or-greater correction coming sometime in the first half of next year.
    If you haven't already invested during this wave, there should be a pullback coming to at least the 1,050-1,060 range on the S&P 500, and if it repeats its recent pattern, that should occur toward the end of this month (November). That said, it's also the case that when the markets become predictable, it's time for them to become unpredictable. (It's remarkable to me that we've had five waves since March, the last three of which seem pretty similar.)
    Michael Ashbaugh's column yesterday was S&P 500 back for another crack at new highs.
    Mark Hulbert writes: Analysis of corporate insiders' behavior.