Daily Investment Interpretations

October 28, 2010


2010-10-28 (Thursday Night):    This was another day when the markets fell and then recovered. The NASDAQ Composite added 4.96 points (0.16%) to 2,507.37  The Dow shaved off 12.33 points (-0.11%) to close at 11,113.95, and the S&P 500 tacked on 1.33 points (0.11%) to end at 1,183.78. Oil was unchanged to $81.96 a barrel, and Gold gained $22 to $1,345. The VIX jumped 0.17 to 20.88.
    The day began with good news: Jobless claims drop. This is the third weekly jobless claims drop in a row, and brings this number to its value in early July.
    My investment advisory service attributes the current range-bound trading to a consolidation phase after a big run-up. If so, the markets will tread water for a few days or a couple of weeks, and then break out again on the upside.  
    Oakmark Equity Income, Vanguard Wellesley  
    Too much stuff  Beguiled by last spring's rebounding marketplace, retailers ordered more inventory than they're now able to sell. The result looks like a squeeze come Christmas. "The result is shrinking margins and a growing pile of unsold stuff. So, how do retailers dig their way out from under it? Consumers. Thatís got to be a little depressing because consumers, still grappling with foreclosures and unemployment at their highest levels in decades, arenít in much of a mood for heavy lifting. If anything, theyíre catching a whiff of the retailersí desperation. Count on them to hold out for even steeper discounts in the critical months ahead."
    Investor sentiment reaches two-year high  "Investor sentiment continued to rise over the past week, with the portion of bullish investors rising 1.6 percentage point to 51.2%, the American Association of Individual Investors said Thursday in its latest survey. This marks the highest level of bullishness in the AAII survey since May 2008 and suggests stock performance is about to make a turn for the worst, according to Bespoke Investment Group. "Unfortunately for the bulls [...], the S&P 500's /quotes/comstock/21z!i1:in\x (SPX 1,184, +1.33, +0.11%) average returns turn considerably worse as bullish sentiment improves," Bespoke Investment said in a note. "When bullish sentiment is between fifty and sixty percent, as it is now, the S&P 500 tends to see lower average returns over the next one and three months than it does for any other range of sentiment.""