Daily Investment Interpretations

October 27, 2011

2011-10-27: (Thursday Night): World markets exploded today: Dow is on track for best-ever October advance, Relief At Last, Stocks SoarThe NASDAQ Composite ended the day up 87.96 points (3.32%) to close at 2,738.63. The Dow vaulted 339.51 points (2.86%) to 12,208.55; the S&P 500 scored 42.59 points (3.43%) to settle at 1,284.59. Oil leaped to 94.02; gold soared to 1,747. The VIX dropped 4.4 points to 25.46.
    Today's explosive rally rests upon three cornerstones of good news: European Leaders Strike Deal on Greek Debt, Europe's in agreement: 50% Greek haircut, and U.S. GDP Grew By +2.5% in Q3; Above Expectations. And now, shorts are being covered, and institutions are jumping on the bandwagon in a spate of end-of-year performance anxiety. Right now, we're seeing a "buying panic", to be followed (probably) by doubts and reconsiderations: No bazooka: EU plan short of permanent fix, and Timeline of the sovereign-debt crisis. Then, too, some investment groups will decide to take some profits off the table: "Buy on the rumor; sell on the news." The only question now is: how much farther will this go? (The Economic Cycle Research Institute forecast of renewed recession in the U. S. is still with us. Usually, their forecasts are issued several months before the stock markets peak.) State of the Markets Curtis Bergquist suggests that a pullback will probably occur within the next three trading days (U.S. stocks near 'overbought' level- Birinyi), but that history points to longer-term gains after a rise like we've just seen: History Says Buy 'Em. This addresses an important question: is it too late to buy into this rally? Curtis Bergquist's advisory says, "No, it's not too late, particularly if you buy in on the inevitable retrenchment that's due in one to three days". 
              
    Technical Talk: Overbought Is Now a Good Thing

    Eurozone Business Sentiment Readings Above Expectations   
    Bank of Japan to Boost QE Program  
    Weekly Jobless Claims Hold Steady at Just Over 400K  
    Bloomberg Consumer Comfort Index Pulls Back 
    Pending Home Sales Fall in September  
      
    Marketwatch has its commentaries on today's events: Did EU get it right? Maybe, and Open question: Haircut a credit event?.  
    David Callaway observes that The 1% just got a lot richer, and PR aside, Madoffs may stay in the 1%
    Robert Powell observes that Money smarts erode quickly after age 60 (by about 2% a year).  
    Peter Brimelow explains that Bulls on move, but targetless. One tidbit that struck me is the fact that the Dow Theory Letters' Richard Russell is 87, and yet, is still writing and publishing his newsletter. There are other investment newsletter publishers who are also octogenarians... James Dines, whom Peter Brimelow characterizes as "probably the most arrogant, egotistical, aggressive and abrasive of all the investment letter editors monitored by the Hulbert Financial Digest" (Dines authors Investment Letter of The Year 2006 - Peter Brimelow ) comes to mind. Mr. Dines is an octogenarian, although as Peter Brimelow goes on to say, "I have been writing nice things about Dines' work -- and he's been responding with nasty notes -- for some thirty years. (The Dines Letter started much earlier, in 1960, although I can't find a mention in his official bio of his, well, AGE)." I've also been unable to find mention of Mr. Dines' age except for references to him as an "octogenarian". 

    Market futures are down about 1/3rd % tonight.