Daily Investment Interpretations

June 18, 2009

2009-6-18:  Cabot's China and Emerging Markets Report urges buying on this dip, as does my market technical analysis service. Cabot's position is that this dip is long overdue: Best-performing bull bellows bravely. Furthermore, there seems to be a lot more skepticism and pessimism than was present a few days ago, which seems to me to be a bullish sign.
    The NASDAQ Composite slipped 0.34 points (-0.02%) to 1,807.72, the Dow added 58.42 points (0.69%) to 8,555.60, and the S&P 500 inched up 7.66 points (0.84%) to end the day at 918.37.  Oil oozed up  $71.46 a barrel, while gold doffed $1 to 935. The VIX fell 0.33 to  31.21.
    I highly respect the opinions of Prieur du Plessis and Todd Harrison, who certainly knows inordinately more about the stock market than I do. At the same time, I have to choose among advisors with differing advice. My choice at the moment is slightly in favor of this pullback being a temporary correction, but the ultimate arbiter will be the actions of the market indices. The S&P 500 has closed for three days now below its 25-day moving average, but is still above its 50-day moving average, and is about 5 points above its 200-day moving average. The Chinese index FXI is right at its 25-day moving average, but it's about 6% above its 50-day moving average.
    The crucial point is that stock prices are still relatively cheap, with the S&P off 40% from its 2007 high, and we're no as longer worried about the world's economy collapsing.

2009-6-18 (Afternoon):  The markets have risen modestly this morning. The cited reason is that continuing jobless claims have begun to decline (slightly) and the Philadelphia Industrial survey has shown the best levels since last September. At the same time, this good news hasn't caused the markets to go into orbit. Prieur du Plessis thinks the markets are topping, and will retreat 10% or more from here. (They might retest their March 9 lows.) My market timing advisory is calling for caution, but for buying on the dips.
    I'll hear from the Cabot China and Emerging Markets Report later today. (The Chinese index, FXI, is off about twice as much as the S&P 500, as is the emerging markets index, EEM. So much for the decoupling of markets!)