Daily Investment Interpretations

June 9, 2009

2009-6-9:  For a third day in a row, the indices have hugged the flat line. They started up this afternoon, but then fell in the last two hours of trading, perhaps because oil closed at $70.66 a barrel. (Of course, $70+ a barrel isn't that much different from $69+ a barrel, but psychologically, $70 a barrel underscores the potential headwind facing the economy that's presented by higher energy prices.) Higher interest rates are also a concern. (It seems to me that higher energy prices and higher interest rates would accompany any recovery, but of course, this time, the Fed isn't able to turn the economy back on by lowering interest rates the way it has in conventional recessions.
NASDAQ Composite advanced 17.73 points (0.96%) to 1,860.13 (putting it up 46.5% since its March 9th low), the Dow slid 1.36 points (-0.02%) to 8,763.06, and the S&P 500 tacked on 3.29 points (0.35%) to close at 942.43 As mentioned above, Oil hit $70.66 a barrel, while gold added $2 to $955. The VIX exfoliated 1.5 to 28.27.
    In short, nothing happened again today.
    Last night, Mark Hulbert published an update on the sentiment indicators he follows: Commentary: Is irrational exuberance staging a revival?, and they're more bearish than ever. His short-term timing investment advisory newsletters have risen from a 57% rise in bullishness to a 60% rise in bullishness over the past week.
    Paul Krugman, Permanent Link to Dismal hours, links to a weblog piece by Harvard economist Jeffrey Frankel, who is a member of the National Bureau of Economic Research' Business Cycle Dating Committee. Dr. Frankel has discovered that when you look not at layoff numbers, which are improving, but at the weekly number of hours worked, they're falling at the same precipitous rate they were dropping last fall.
    Meanwhile back at the bourses, Michael Ashbaugh observes, Profoundly moving, that "the U. S. markets' path of least resistance remains higher until proven otherwise."
    Juxtaposed against this is the Cabot Market Letter, which is unabashedly optimistic.
    A look at the two-year S&P 500 chart below shows that, had you bought it in April when its 50-day moving average turned up, it would already have gained almost 200 points. Since then, it has risen only about 85 points, and hasn't budged since June 1.
    My own personal investments are in alternative energy funds, and in China and Emerging Markets stocks recommended by the Cabot China and Emerging Markets Report, so I'm not entirely locked into the U. S. stock market.