Daily Investment Interpretations

May 7, 2009

2009-5-7 (Before the Close):  Today seems to me to be an example of, "Buy on the rumor; sell on the news." Insofar as I'm aware, the news today seems to be upbeat, and yet, the markets, which have been ignoring bad news, are down a little. We'll have to see what happens near, and at the close.
     From my perspective, today's big news is that Paul Krugman has capitulated,,, sort of: Falling Wage Syndrome. Dr. Krugman observes that U. S. wages are tipping into deflation, and that this, coupled with an expectation of further declines, can interfere with savings and with debt reduction. However, he concedes that there do appear to be signs of economic recovery.
    So does this represent the capitulation of the bears? The gurus at Minyanville seem to think so: Nine Reasons Why This May Be a Sell Setup, Advice for Stressed-Out Bears, Randoms: Levels of Lore. Another technical advisory service of mine is also flashing yellow warnings. So what should we do? And my guess is that the answer is: nothing, or raise cash. 
    This is good advice for me, since I bought various stocks today at today's slightly reduced prices. But I'll sell them tomorrow at little or no loss, and (I hope) at a gain from where they were when this up-market began.
    Could these advisors be wrong? Could the market indices continue to rise in spite of their warnings? As far as I know, the answer is, "yes". S&P = 950, when the S&P 500 surmounts its 200-day moving average, is being suggested as an upper ceiling on the current "mini-bull market" turnaround level if a reversal doesn't occur at a lower level. I guess we can wait a little longer to see what happens.
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2009-5-7 (End of the Day):  
    Today was a day of stock market losses. The NASDAQ Composite fell 42.86 (-2.44%) to 1,716, the Dow subtracted 102.43 (-1.2%) to end the day at 8,410, and the S&P 500 dropped 12.14 (-1.32%) to 907. Oil closed at $57.03 in anticipation of a recovery, while gold rose to $915.50. The VIX fell 0.99 to 33.44.
    One catalyst for concern with financial stocks was, allegedly, a bad Treasury auction of 30-year bonds in which the interest rate climbed from 4.19% to 4.28%: MV Weather Report: Clouds Starting to Gather on Market's Horizon. This was in anticipation of future inflation, and it may also have reflected the Chinese government's latest warning about the U. S. government's monetary policies, and their impact upon the value of the Chinese government's stash of U. S. bonds. Another reason for this modest pullback: investors taking a little money off the table after a 4.8% run-up so far this week, and ahead of the after-hours bank stress test results and the Friday jobs report.
    Ex-Bear Jeremy Grantham Now a Snorting Bull, Says Stocks Going to Moon.
    In this article, Jeremy Grantham says that the S&P 500 may go bananas and (gasp!) hit 1,000-1,100 by year's end! But then it will be crash, smash and burn for years to come.