Daily Investment Interpretations
May 8-9-10, 2010
(After the Bell):
The markets closed close to where their futures predicted, with a
last-minute buying surge boosting closing prices. At the close, the NASDAQ Composite
was up 109.03
to 2,374.67, the Dow is up another 404.71
and the S&P 500 has
to end at 1,159.73. Oil rebounded $2.29
to $77.34 a barrel, while Gold subtracted $9
to close at $1,202:
The VIX jumped 8.15
The VIX cratered 12.11
After an initial boost, the market indices flat-lined for the rest of the day, drifting down a bit during the afternoon, but reclaiming their losses near the end of the day (with a strong selling surge in the last minute or two). Given this flat performance, it's hard to know where prices will go next. I bought three ETFs before the markets opened this morning, paying the elevated prices I would have paid if I had waited 15 minutes or so. (You have to ask: who bought these stocks before the markets opened, or immediately after the markets opened? I presume that someone has to be buying them in order to bring their prices up. For example, between 9:31 and 9:32 Eastern time this morning, S&P 500 rose from 1,132 to 1,142. Someone had to have been able to buy at 9:31 when the S&P was at 1,132... someone who could have made a killing. How does that work?) One of the ETF's I bought rose $420, while the other two lost a few dollars when the markets drifted down a little this afternoon. I sold them and booked a net profit of, probably, $350 after commissions. Now, if I had kept that ETF, I would be looking at (an unrealized) gain of $780, but that's the way it goes.
The real question is: where do the markets go from here? To rise from here, the indices will have to break through their old levels of support, which have now become new levels of resistance.
From a longer-term perspective, Europe isn't out of the woods yet. A near-term slump may well be in our horoscopes: Permanent Link to Second Thoughts?.
Mark Hulbert is suggesting tonight that today's resurgence may be little more than a technical bounce: Street just being contrary? (See also: MarketWatch First Take: Breaking analysis.
My investment advisory service is also less than certain that today's action is a prelude to further stock market gains.
Here's another Goldman-Sachs type of article: Bets against clients.
2010-5-10 (Before the Bell): The futures markets are up more than 4% before the market opens: A rescue package that works, A massive relief rally. At this moment (an hour-and-a-half before the bell rings) the NASDAQ Composite is up 77.75 points (4.21%) to 2,343.39, the Dow is up another 403 points 3.9%) to 10,883.43, and the S&P 500 has advanced 50.2 points (4.53%) to end at 1,161.28. These gains approximately equal last Thursday's and Friday's combined losses.
This is a rum go. How can anyone make money in a market that moves this drastically while out of reach of ordinary investors? I suspect there will be beating of breasts and gnashing of teeth over this on the part of the investing public. I'll be eager to hear what my investment advisory service has to say about this after moving its subscribers to 100% cash last week (though early enough to have avoided most of last week's losses).
I suspect that after the initial stampede takes place, the markets will pull back as the anticipatory buzz fades, and the realities of this tough situation reasserts itself. (Already, the Dow futures have pulled back to 376.)
I have entered pre-market purchase orders for a few ETFs that I want to own to put me back where I was before this pullback began, re-investing about 10% of the value of my portfolio..
2010-5-9: What a difference 24 hours can make! European finance ministers have agreed (IMF approves Greece loan as Europe tries to stem crisis) to do "whatever it takes" (Europe plays zone defense) to rescue Greece, and have pledged $900 billion to shore up the PIIGS (Portugal, Ireland, Italy, Greece, and Spain): Europe and U.S. step up rescue efforts. Simultaneously, the Fed has announced plans to beef up the U. S. lending program as the stimulus package runs out: Fed to reopen dollar swaps. As a result, market futures have gone from 1% to 2% underwater to more than 2½ % above water. The S&P 500 is already up almost 30 points. If these futures hold up tomorrow morning, I may buy some attractive stocks before the market opens (getting the opening price, whatever that turns out to be). But we'll see.
There could be panic buying as investors scramble to scoop up bargains before they disappear.
Keep watching this spot..
2010-5-8: There is, after all, some news tonight. My investment advisory service has warned that no satisfactory explanation has been forthcoming for Thursday's 993-point plunge in the Dow, and that is this doesn't happen soon, professional investors like them are going to lose confidence in the U. S. markets. This could lead to Todd Harrison's "Black Monday" (Todd Harrison dissects the 1,000-point plunge). Ominously, market futures are off between 1% and 2% tonight. Of course, it's nearly 36 hours until the markets open, so a lot can happen between now and then. Meanwhile, here's an article warning of the expiration of the fiscal stimulus program: Goodbye, stimulus. Hello, teacher cuts.
Of course, when the markets fall, the news is always bad enough to shake confidence in the system. Otherwise, the markets wouldn't continue to fall. Still, I might do more selling on Monday, and, possibly, buy an Exchange-Traded Fund that bets against the markets in order to to hedge the mutual funds that I really can't sell without paying a short-term penalty.