Daily Investment Interpretations

June 15, 2009

2009-6-15:  The markets certainly took a drubbing today. The NASDAQ Composite retreated 42.42 points (-2.28%) to 1,816.38, the Dow gave up 187.13 points (-2.13%) to 8,612.13, and the S&P 500 declined 22.49 points (-2.38%) to end the day at 923.72 As mentioned above, Oil fell 0.45 to  $70.17 a barrel, while gold dropped $13 to 928. The VIX jumped 2.36 to  30.81.
    The S&P 500 is still above its 25-day moving average, but only just. And the 25-day moving average appears to be sloping over to form a short-term top. Ugly Day on Low Volume: More Froth To Be Wrung Out of Market? One factor to consider: Treasury Secretary Geithner set forth new reforms today: U.S. financial regulation reforms outlined, and warned that further travail lies ahead. (I note, though, that deficit hawks are calling for an end to fiscal stimulus and to zero interest rates because of the "threat" of inflation. Mr. Geithner's remarks could be aimed at the deficit hawks.)
    Paul Krugman has posted this tonight: Permanent Link to Unemployment claims and employment change.
    This is the long-awaited pullback: Funds look to pullback to get in stocks
    If the S&P 500 doesn't turn around and start back up tomorrow, I'll begin lightening up, based upon its 25-day moving average. I won't sell out unless its 50-day moving average turns down, but I'll trim my exposure in the riskier issues in my portfolio.
    Of course, what matters to me most is the Chinese marketplace, and there, things still seem to be moving up. But even there, FXI closed today at $38.23, and its 25-day moving average appears to be at just about that level (please see the FXI chart down below).

6-15 (Early Afternoon):  That sinking feeling!
    Today's falling markets are allegedly keying on a statement by International Monetary Fund chief Dominique Strauss-Kahn during a visit to Kazakhstan that, "
The large part of the worst is not yet behind us." However, the G8 ministers at the current IMF meeting concluded that most world economies have touched bottom. They also raised their GDP estimates slightly for the U. S. for 2009 and 2010. "Li Yang, a former adviser to the People's Bank of China, said he expected China's recovery to be 'W-shaped' meaning growth will falter once fiscal and monetary stimulus wears off, before regaining momentum. Worst Yet to Come: IMF Chief.
    Another downer was that the New York "Empire State" manufacturing index, considered to be an industrial bellwether, fell a little more in June (
-9.41) than it had in May (-4.55).
    Note that this confirms the "W-shaped" recovery confirms the rumors that have been making the rounds the past few weeks. 
    925 is a support level for the S&P 500. A close today below 925 would be a warning sign. But for now, it would pay to simply watch and wait. The end of the quarter is coming up, and fund managers have incentives to dress up their portfolios. Jeff Saut: Why Shorting Stocks Now Could Be a Grave Mistake Is this the beginning of the long-awaited pullback? Will institutions view this dip as a buying opportunity, or is it the beginning of something more serious? Minyanville's Smita Sedana gives us, "Five Reasons to Be Cautious Now"
    Paul Krugman expresses his concerns about a long-term global recovery: Will Hutton. He is also hearing hints about a second round of fiscal stimulus.