Daily Investment Interpretations Archive

January 1, 2009, to June 30, 2009
July 1, 2008, to December 31, 2008

May 7, 2008, to June 30, 2008

2008-6-30:  The Dow and the S&P 500 indices ended the day essentially unchanged, while the Nasdaq fell another 1%. The Dow has ended the month with its worst drop since the Great Depression, with the S&P and the Nasdaq right behind it.
    In the meantime, try this on for size. GM stock has dropped 75% so far this year. It did $180 billion worth of business over the past year. Its market capitalization is $6 billion. It closed today at $11.50 a share; Morningstar Fair Value Estimate is $6.00 a share. Can you say, "Buyout?" Its forward Price/Earnings Ratio is -68.5, Its Price/Book value is -0.2 (i. e., it owes more than it's worth), and its dividend yield is 8.7% (but good luck getting the money). In other words, GM can be bought for, perhaps, 30% of the cost of the little solar energy company, First Solar (FSLR), and that would still be at almost twice what Morningstar considers GM's Fair Value Estimate. 
   The VIX closed at 23.85. The best guess is that this market is still headed down.


2008-6-27:  Another bad day at Block Rock. The Dow lost another 103 points (0.93%) to close at 11,346.5, carrying it to the brink of a bear market (defined as being down 20% from its peak). So far, the Dow is down 10.8% for the month. The S&P 500 fell 4¾ points to end the week at 1,278--21 points above its March 17th intraday low of 1,257, and only 2 points above its March 17th close of 1,276. The Nasdaq Composite shed 5¾ points (¼%), ending the day and the week at 2,315.63... still well above its March low of 2,155, but still falling. Meanwhile, the VIX actually fell from 23.95 to 23.44. It's worth noting that earlier in the month, when the VIX reached this range on June 6th, the S&P 500 stood at 1,360--80 points, or more than 5% higher than now. Prior to that, the VIX closed at 23.82 on April 14 when the S&P 500 closed at 1,334.43. And before that, on April 1, 2008, the S&P closed the day at 1,370, while the VIX ended up at 22.68. So it appears that the VIX has shifted its readings downward as the market has slowly lost ground. (The chart pattern is suggesting something like the early phases of the January and March lows.) In January, it took 3 trading days to go from a comparable place on the charts to a bottom, with the S&P 500 dropping 63 points. In March, it took 11 trading days from a comparable chart state to reach a bottom, with the S&P falling 54 points. If that were to happen now, it would occur within the first two weeks in July, and would see the S&P declining to about 1,220.
    One key driver for this is the fact that oil hit $142.99 a barrel today.
    Of course, there's also the chart pattern of the 2000-2003 time frame to contemplate, as shown in the (new)  10-year chart at the bottom of this page. How does an S&P of 800 sound?


2008-6-26:  Wall Street plunged today, with the Dow breaking below its January low of 11,635 to close at 11,453, its lowest value since September, 2006. For the month, the Dow has so far dropped more than 10%, a decline unmatched since the 1930's. The S&P 500 ended the day 26 points above its March 17, 2008, intra-day low of 1,257, and 6.5 points above its March 17th closing value. The Nasdaq Composite, finishing at about 2,321, is still well above its March 17 intra-day low of 22,155. In the meantime, the VIX climbed to a paltry 23.93... higher than yesterday, but still not  the kind of level above 30 that commonly signals a market bottom.
    My guess: the markets will continue to fall until they stage a steep sell-off that prompts a VIX reading above 30. In the meantime, (I'm speculating), we're (maybe) on a slippery slope to a deepening bear market.
Later:
  I've just read an opinion that if the markets fall tomorrow the way they did today, we'll see federal intervention next week. 
    Time will tell.


2008-6-25:  The Dow remained virtually unchanged at 11,812, the S&P rose 0.58% to 1,322, and the Nasdaq jumped 1.39% to 2,401. Warren Buffett was quoted today saying that the economy seems to be continuing to deteriorate, based upon the real-time information he receives. Along with this comes a Marketwatch article entitled, "Investment Newsletter Insights: Gloomy but not quite gloomy enough" which reviews Mark Hulbert's and Peter Brimelow's assessments of investor sentiment.


2008-6-24:  Michael Ashbaugh has released another technical analysis of the markets and they're looking increasingly dire. All three indices declined today, with the Dow falling 0.29% to 11,830, the S&P shrinking 0.28% to 1,314, and the Nasdaq falling 0.73% to 2,368. Mr. Ashbaugh says that the Dow is back within "sky is falling" territory, while market sentiment, as measured by the VIX, at 22.4, remains "unusually complacent". 
    The markets haven't yet broken decisively below their January/March lows, but my guess would be that they'll soon do so, going lower before they go higher.


2008-6-23:  The S&P and the Dow ended the day unchanged from where they started. The Nasdaq Composite dropped 0.8% (by about 20 points), but at 2385, is still about 56% above its lowest low of 2,155 (on March 17th). Meanwhile, the VIX has fallen slightly to 22.64. ("What! Me worry?") So basically, the market treaded water today.
    Near-term, I see no cause for optimism.


2008-6-20:  Today, the markets plunged. At 11,842, the Dow closed only about 100 points (less than 1%) above its March low of 11,730. (March lows hold, for now) What's worse, investment advisors aren't very worried about what's happening. (Hulbert: Contrarians on capitulation watch) The VIX ended the day at about 23, compared with 31 last January 17th, when the market closed at 12,160, and with 31 at the bottom on January 22nd, when the Dow closed at 11,971. 
    But what's more ominous to me is the character of the chart. From December 26, 2007, when the Dow closed at 13,360, to its climactic sell-off on January 22nd, 2008, the Dow dropped precipitously, with the final capitulation of the bulls and frantic selling taking the Dow down to 11,730, and the VIX up to 36.6 on that day (Monday, January, 22nd). The next day, January 23rd, saw a rise of more than 600 points in one day.
    Now contrast that with what's been happening lately, Instead of declining steeply, the stock market is gradually sashaying downward, with the VIX wandering between 20 and 24.
    The S&P closed today at 1,318, with the VIX at 23. By contrast, last January 17th, The S&P closed at 1,333, with the VIX at 31, and on January 22nd, it dropped further to 1,274, with the VIX spiking to 36.6. (It was on March 17th that the S&P fell to its low of 1,257, while the VIX peaked at 35.6 that day. It closed on March 17 at 1,277, with the VIX at 32.)
    My belief:  the Dow and the S&P are getting ready to penetrate their January lows. They have yet to go into a climactic sell-off that will signal at least a temporary market rebound. 
    This may lead to another leg of a bear market. I think it's time to sell, in anticipation of better prices to come.
    There's another matter that probably needs to be mentioned: geopolitical risk. I have just learned tonight that after the Prime Minister of Israel, Ehud Olmert. conferred with President Bush in Washington on June 4th, he issued the following statement to the press:
    “We reached agreement on the need to take care of the Iranian threat. I left with a lot less question marks [than] I had entered with regarding the means, the timetable restrictions, and American resoluteness to deal with the problem. George Bush understands the severity of the Iranian threat and the need to vanquish it, and intends to act on that matter before the end of his term in the White House.”
    A member of Olmert’s delegation noted that same day that the two countries had agreed to cooperate in case of an attack by Iran, and that “the meetings focused on ‘operational matters’ pertaining to the Iranian threat.” 

   
Last week, Israel's Deputy Prime Minister, Shaul Mofaz, told the press that an attack on Iran is "unavoidable" if Tehran doesn't halt its nuclear enrichment program. His colleagues denounced his statement as motivated by personal ambition, but today, it has been revealed (presumably on purpose) that Israel carried out a full-scale dress rehearsal of an attack upon Iran earlier this month. The Director of the U. N.'s International Atomic Energy Agency's Mohamed El Baradai, has just announced that he will quit if anyone invades Iran. He states that the threat from Iran is negligable, and that an unprovoked attack on Iran would raise the price of oil to "unimaginable levels"  and would turn the region "into a fireball". Russia, with an estimated 8.500 thermonuclear warheads and the ICBM's to deliver them, has just warned against attacking Iran.
    These developments might possibly have been a factor in today's price action. (Shaul Mofar's remarks to the press last week caused a drop in the stock market, and a hike in oil prices.) August has been rumored as a time frame for an attack on Iran. One scenario would have Israel attacking Iran, and the U. S. stepping in if Iran retaliated against Israel. So far, this is all smoke and mirrors, but it invites monetary caution.
    It's hard to imagine what the impact of an attack on Iran and an explosion of the Middle East would be upon the world's stock markets. It already remains to be seen whether the world's stock markets will sustain further declines from here even if the geopolitical situation remains unaltered. (The Shanghai Composite is already down more than 50%.) 
    Pakistan, armed with nuclear missiles, seems to me to be the smoldering time bomb.


2008-6-19:  Today, the S&P 500 rose 0.38%, the Nasdaq Composite, climbed 1.33%, and the Dow was hiked 0.28%. These slight advances are credited to a fall in crude oil prices because Saudi Arabia has announced that it will pump more oil. However, nothing has happened that can't be undone tomorrow.
    The VIX dropped 2/3rds of a point to about 21.6.


2008-6-18:  I'm changing chart formats tonight. The charts I've been using until now come from the Fidelity Group's Active Trader Pro service, and aren't automatically publicly available, whereas the charts to which I'm switching are in the public domain, and in addition, automatically update each night. The charts below won't be updated until the middle of the night, so you'll need to look at them tomorrow (June 19, 2008) to see the latest updates.
    Today, the S&P fell 0.97%, the Nasdaq Composite dipped 1.14%, and the Dow shed 1.08%. This leaves the S&P, at 1350, about 94 points above its March17th bottom of 1256, and about 90 points below its May 19th high of 1440. The Nasdaq, 2,424 is doing better than the S&P 500, down about 100 points from its May 19th high, and nearly 300 points above its March 17th low of 2,155, while the Dow, at 12,023, is a little less than 300 points above its May low, and about 1,100 points below its May 19th high of 13,137. In other words, the S&P 500 is down about 50%, while the Nasdaq is down a little more than 25%, and the Dow is down more than 75% from its May 19th high.
    The VIX ended at 22¼.


2008-6-17:  Today, the S&P 500 and the Nasdaq Composite dropped about 2/3rds %, while the Dow fell a little more. More importantly, Michael Ashbaugh points out today that although the markets have been trading in a trading range for the past few days, the market charts are signaling behind-the-scenes deterioration.("8-to-1 down days raise technical caution flag") Raising cash appears to be the prudent near-term strategy.
    In the meantime, Paul Farrell has written this intriguing article concerning the "neuroeconomic" manipulation of investors.


2008-6-16:  Today, the stock market essentially went nowhere. The S&P was virtually unchanged, the Nasdaq Composite rose 0.83%, and the Dow Jones average dropped about 1/3rd %. The VIX is sitting at 21, showing a little respect for the uncertainties of the marketplace.


2008-6-13:  Will wonders never cease? Today, the S&P 500 jumped 1.5%, the Dow climbed 1.37%, and the Nasdaq Composite rose 2%. Of course, this is all within the normal give and take in a bear market. One interesting fact that's buried in the fine print on page 3 is that overall inflation rose 0.6% for the month, but for the past three months, the core inflation has fallen to a rate of 1.8% per year (0.15% per month)... which may be why the stock market soared today. The reason this is important is because it allegedly suggests that, as least so far, inflation hasn't bled through to the expectations-driven inflation that leads to an inflationary spiral. Of course, it's the overall inflation that we really face. The suggested reason that overall inflation isn't driving core inflation higher is that, with the unemployment rate rising, employees (that's us, folks) don't have much pricing power. We want more money, but better some money than none.
    As of tonight, Dow Theory Forecasts remains firmly in the bullish camp, and is looking for opportunities to invest more cash in attractive stocks. But for what very little it's worth, I'm uncomfortable with the VIX, which has fallen to 21.2 (bearing in mind that I truly know doodledy-squat about technical analysis).
    I read an article tonight explaining why the Fed concentrates on the core rate of inflation rather than the "headline" rate that includes energy and food costs. The reason isn't that it allows the government to hold down cost-of-living adjustments, but because food costs fluctuate with harvest conditions and energy prices are mercurial and are dictated by factors external to the United States. The Fed can't raise and lower interest rates based upon the vagaries of the food and energy markets because it takes many months for changes in interest rates to affect the U. S. economy. The Fed would be chasing a zigzagging target.


2008-6-12:  Today, the market indices rose approximately 0.4%--in other words, insignificantly. In the meantime, the title of Michael Ashbaugh's assessment, written this morning, is, "Technically, U. S. Markets Move Back to Square One". This article isn't publicly available. I'm guessing it alludes to the fact that the market appears to be retesting its March 17th lows, and that it could go either way from there. Mark Hulbert has also become cautious, as set forth in this article. He observes that sentiment is more optimistic than it was in March, and that it remains to be seen whether the March lows will hold.
    In the meantime, The VIX indicator, at 23.33, is about where it was at a minor market peak in late February, just before its three-week climb to a pinnacle of fear and a market bottom on March 17th.
    In addition, before the markets can turn upward, we would expect a selling stampede that generates a stock market plunge, signaling the capitulation of the bulls, followed by a full recovery either the same day or the next trading day.


2008-6-11:  Well, the fat lady sang today. The S&P dropped another 1½% to 1335½, putting it about 78 points above its March 17th low of 1257, and about 103 points below its May 19th high if 1440. The Russell 3000 index, .RUA, that Michael Ashbaugh warned shouldn't fall below 790 is now at 780. (Michael Ashbaugh's latest advice, "The Technical Indicator: Hammering Out the Bear and Bull Case", was written this morning, so I'm not sure that it's still germane to what actually happened today, but for tonight at least, it's available only to subscribers to his newsletter.) 
    What worries me most is the VIX. With all this carnage in the markets, it's only risen to 24. I t appears to me that there's "What, me worry?" sentiment showing up in the VIX. In the meantime, oil continues its upward march, quite a lot of U. S. cropland has been flooded out, and President Bush ratcheted up the "attack Iran" rhetoric a bit today. It looks to me (a financial illiterate) as though things will have to get a lot gloomier to turn the sentimental tide toward abject terror.
    On the flip side, the Federal Reserve believes that their rate reductions will kick in this fall and winter, and that this should be sufficient to kick-start the economy. Also Dow Theory Forecasts has issued an extensive email report tonight, explaining why they still believe that this is a normal pullback in a bear market, and they still recommend a low cash position. And finally, Mark Hulbert tells us that the best investment advisors are more upbeat than ever (audio) about the stock market right now. And I have to say: the stock market always turns when you least expect it. The stock market is truly darkest just before the dawn.


2008-6-10:  Today, the S&P dropped 0.2%, the Nasdaq Composite fell 0.43%, while the Dow rose 0.08% above yesterday's close. In the meantime, Michael Ashbaugh's technical analysis, which wasn't available yesterday except for the title, is now online: (Technically, U.S. markets' recovery is intact says Michael Ashbaugh). Mr. Ashbaugh states that, technically, the bull market hasn't broken down yet, although it's teetering on the edge of a precipice. (He explains that the reason the Dow has been hit so hard is because five of its 30 corporations are banks, and banks have again gone off a cliff.) For example the Dow Transports are holding up well. He says that only if all three of the major indices break significantly below their 50-day moving averages are we heading into a bear market.
    As a proxy for all three major indices, he invokes the Russell 3000 index (.RUD), and mentions that, "A decisive break under that area [790] would place the U.S. markets back within "sky is falling" territory - the panic-induced levels endured during January and March - making the bull case difficult to defend." 
    The Russell 3000 index closed at about 794 today, down 2.5% and perilously close to its 790 support level.
    It's worth noting that Mark Hulbert and other economists are suggesting that the indices seem bent on re-testing their March 17th lows. Clearly, in Michael Ashbaugh's scenario,  if they drop much below where they are now, the fat lady will have sung.
    Looking at the charts:

    The VIX has risen slightly today, in spite of the fact that the major averages have fallen slightly. And in the upside-down world of the stock market, a rise in investor confidence in a falling market is a bad sign.


2008-6-9:  The S&P was unchanged, the Nasdaq dropped 0.6%, and the Dow rose 0.7% today. 
    The pundits are still positive about the long-term, bull market trend. Michael Ashbaugh says, "Nine-to-one down day raises eyebrows, doesn't alter (bullish) outlook"     Also, "Al Goldman, chief market strategist at Wachovia Securities, tells Andrew O'Day wild volatile swings are normal as Wall Street slowly transitions from a bear to a bull market. He says it helps to be crazy in this business."  MarketWatch Morning Stock Talk: Al Goldman: Friday selloff was way overdone. Mr. Goldman predicts that the economy will continue to crater, bottoming this fall, but the stock market will turn up about four months before the economy hits bottom. 
     Note, though, Mark Hulbert's admonition in today's column concerning advisor sentiment: "Stock advisers too sanguine?" At 1360, it looks as though the S&P 500 is down about 45% (80/180) from its May 19th 1440 high, with another hundred points to reach its March 17th intraday low of 1256. The VIX has risen 8 points from 16 to 24. It would need to rise another 12 points to 36+ to outdo its previous May 19th peak of about 35.7. (Bear in mind that if this happens, investors will be convinced that the economy is going to crash and burn. You'll be able to spread the gloom and doom on your toast.)
    Mark Hulbert mentions that the market seems intent on retesting its March lows. His point is that if it does, it will be bearish if sentiment isn't even more negative than it was at its March 17th low.

    The Nasdaq Composite has been hit hard the past two days, although it's still well ahead of the Dow and the S&P.

    The Dow is about 60% of the way to its May 19th trough.

    The VIX is rising handily, peaking at 24.5, and closing at 23.12. Of course, it still has a way to go to reach the blood-in-the-streets level of terror characteristic of a market minimum. In retrospect, its bottom value of 16 on May 19th turned out to be a turning point in the market. Unfortunately, I had too little experience to be confidant of my interpretation of this watershed event.


2008-6-9:  The S&P was unchanged, the Nasdaq dropped 0.6%, and the Dow rose 0.7% today. 
    The pundits are still positive about the long-term, bull market trend. Michael Ashbaugh says, "Nine-to-one down day raises eyebrows, doesn't alter (bullish) outlook"     Also, "Al Goldman, chief market strategist at Wachovia Securities, tells Andrew O'Day wild volatile swings are normal as Wall Street slowly transitions from a bear to a bull market. He says it helps to be crazy in this business."  MarketWatch Morning Stock Talk: Al Goldman: Friday selloff was way overdone. Mr. Goldman predicts that the economy will continue to crater, bottoming this fall, but the stock market will turn up about four months before the economy hits bottom. 
     Note, though, Mark Hulbert's admonition in today's column concerning advisor sentiment: "Stock advisers too sanguine?" At 1360, it looks as though the S&P 500 is down about 45% (80/180) from its May 19th 1440 high, with another hundred points to reach its March 17th intraday low of 1256. The VIX has risen 8 points from 16 to 24. It would need to rise another 12 points to 36+ to outdo its previous May 19th peak of about 35.7. (Bear in mind that if this happens, investors will be convinced that the economy is going to crash and burn. You'll be able to spread the gloom and doom on your toast.)
    Mark Hulbert mentions that the market seems intent on retesting its March lows. His point is that if it does, it will be bearish if sentiment isn't even more negative than it was at its March 17th low.

    The Nasdaq Composite has been hit hard the past two days, although it's still well ahead of the Dow and the S&P.

    The Dow is about 60% of the way to its May 19th trough.

    The VIX is rising handily, peaking at 24.5, and closing at 23.12. Of course, it still has a way to go to reach the blood-in-the-streets level of terror characteristic of a market minimum. In retrospect, its bottom value of 16 on May 19th turned out to be a turning point in the market. Unfortunately, I had too little experience to be confidant of my interpretation of this watershed event.


2008-6-5:  Whew! What a day! The Dow dropped almost 400 points, or more than 3%. The S&P dropped 3.1% and closed at 1360... well below its support level of 1373. The Nasdaq dropped almost 3%. The proximate causes of these hiccups was a triple whammy. 
    (1) The unemployment report came in far above consensus estimates at 5.5%. (Economists were projecting 5.1%, up from 5.0% last month.) 
    (2) Oil spiked above $139 a barrel, with a Goldman Sachs forecast of $150 a barrel by July 4th. 
    (3) And last and worst, an Israeli Deputy Prime Minister warned Iran that Israel would attack Iran if it continues its uranium enrichment program. (One expert predicted oil prices of $300-a-barrel-and-up if Iran mined the Strait of Hormuz.)
   After the close, 
    (1) Dow Theory Forecasts remarked on the day's volatility, but continued to frame this in the context of an ongoing bull market, and recommended heavy exposure to stocks; 
    (2) JPMorgan Chase & Co. stated that investors are misreading the unemployment report (it's a fluke), and recommended buying stocks; and 
    (3) a third investment advisory service (on Public Television) states that although we might retest the January low, we saw the bear market bottom in January. (This latter pundit warned last fall that the sub-prime crisis was being underestimated, when housing prices were two standard deviations above the affordability level, but says that homes have now depreciated sufficiently to be affordable again.)
    There are rumors that an attack on Iran will occur in August. Given Israeli Prime Minister's Ehud Olmert's visit to the White House this week, and Secretary of State Condoleeza Rice' trip to Israel last week, one might speculate that something is going down. However, since Israel has warned Iran rather than launching an attack on Iran, I would suppose that there will be a few-week grace period for negotiation before any assault is made upon Iran (assuming that this happens). 
    One scenario that's been suggested is that in which Israel attacks Iran's nuclear installations, and the United States prevents a missile counterstrike on Israel.
    Chances are that there will be at least a partial rebound in the markets, unless some new shoe is dropped.
    The VIX has jumped from a low of 16.3 to 23.56.

    My inclination is to sit out this choppy market until we see which way it's going to go, at least until the end of August. Geopolitical crises are an investing wild card.


2008-6-5:  The market jumped like a scalded cat today, with the S&P climbing almost 27 points, or 1.9% in one day. The proximate cause for this rally was the series of economic reports that came out better than economists had forecast, culminating in an unemployment figure that was lower than expected. So far, there's little to indicate that this economy is in a recession. One point, to consider is that the economy grew at an annualized rate of 0.9% in the first quarter, or 0.225% for the quarter itself., The Federal Reserve has revised its forecast for economic growth downward to 0.3% to 1.2% for the year, so, after subtracting out 0.225% for the first quarter, the Fed's forecast for the balance of the year would point to a total growth of 0.075% to 0.975% spread out over the rest of the year, or an average growth in GDP (Gross Domestic Product) of 0.025% to 0.325% per quarter.
    The S&P 500 is close to its 1406 breakout.level.
    The Nasdaq Composite has closed higher than its preceding closing price, and at its previous intraday high.
    The Dow is still way down.
    The VIX dropped to 18.64 today, but is still more than 2 points above where it was the last time the S&P 500 was where it is now.
    Of course, the real question is: what next? The Nasdaq Composite is poised to climb to new highs, but not so the S&P 500 or the Dow.
    Tomorrow will be another day. We'll see.


2008-6-4:  The S&P 500 and the Dow went nowhere today, although the Nasdaq Composite rose 0.91%. The economic news was better than expected, and continues to be better than expected. The sticking point is continuing worry over the financial sector, with Lehman Brothers, J. P. Morgan, and Morgan Stanley downgraded by Standard & Poors. In addition, Moody's has threatened to downgrade two bond insurers. In the meantime, tonight's Dow Theory Forecasts is unconcerned about these daily gyrations.
    The VIX rose above 21 during the day, falling back to 20.8 at the close. But it's creeping up.


2008-6-3:  The indices were slammed again today today, with the S&P down another ½%, and the Nasdaq Composite and the Dow dropping another  0.4%. Today's bad news was that Lehman Brothers--watched closely on the Monday after the Bear Stearns sale--is planning to sell $4,000,000,000 in stock in order to raise additional liquidity, re-igniting fears of another Bear Stearns fiasco (as well as of other falling dominoes). In addition, Federal Reserve Chairman Ben Bernanke gave a speech emphasizing inflation, and suggesting that interest rate hikes might come sooner rather than later. 
    My Dow Theory Forecast advisory newsletter states that the bull market is still intact, while Marketwatch's Michael Ashbaugh's technical analysis also remains moderately bullish: "the pullback has inflicted limited technical damage to this point.". Mr. Ashbaugh observes that the Nasdaq Composite is still holding up well. The Dow is in the worst shape, with the S&P 500 in between (as may be seen in their charts below). (The S&P 500 closed at 1377.63, 4.63 points above its technical support level of 1373, although it fell below this support level during the day.) However, until all three indices break down, the primary trend can still be considered to be up.
    The VIX got as high as 21 but settled back to 20.24 at the close. 


2008-6-2:  The indices took a bath today, dropping roughly 1%. The official reason is that there were several financial shocks today, with Wachovia Bank firing its CEO in the wake of massive subprime writedowns. (Often, the real reason will be published a day or two after the first explanation appears.) The Indices dropped further, but then partially recovered toward the end of the day.
    To me, this chart pattern looks ominous, and it's consistent with the rising optimism implicit in the VIX. It looks to me as though these indices have topped and are beginning to fall again..
Later:  Mark, Hulbert, publisher of The Hulbert Financial Digest (a kind of "Consumer Reports" for investment advisory newsletters) reports tonight that out of the 10 newsletters that he tracks with the best risk-adjusted market timing track records, seven are bullish and three are bearish... reassuring, and not what I would intuitively have surmised.
    Of course, there are no guarantees.
    The Nasdaq Composite has fallen back to about halfway between its May 19th top and its May 23rd bottom.
    The Dow fell below its May 23rd bottom on an intraday basis.
    About the only silver lining is the sharp rise in the volatility index (VIX).


2008-5-30:  The S&P scored a measly 2-point gain today, after fluttering up and down all day. It still hasn't crossed the halfway mark on its way back to its previous high-water mark. At the end of the day it plunged, and then regained about half its pre-plunge value.
     The Nasdaq Composite also ended the day a little above yesterday's close.
    Predictably, the Dow fared about the same.
    And finally, the VIX closed down a little at 17.83.
    The week closed up, with four successive up days, but it seems to me as though the situation is still critical and up-in-the-air.


2008-5-29:  The S&P eked out another gain today of about 0.5%, ending with heavy selling followed by heavy buying. It's still about 0.5% below the halfway point between its recent low of 1373 and its previous high of 1440. 

The Dow rose about 0.4%, 

while the Nasdaq Composite climbed about 0.85%, putting it about 85% of the way back up to its May 19th high of 2551.

Meanwhile the VIX ended the day at 18.14 as confidence oozes back into investors.


2008-5-28:  The S&P 500 fell about 0.4% today, and then at the end, rose about 0.35%, bringing its climb over the past two days to about 1%. The Dow increased about 0.4.%, and the Nasdaq Composite jumped about 0.2%. The Nasdaq has recovered more than half its losses. On the other hand, the Dow's recovery is decidedly anemic.
    The VIX dropped today, but is still above its May 19th low.

    I suppose the fact that the indices rose sharply on high volume in the last 40 minutes of trade is a bullish sign, but we'll have to wait and see what follows. The markets aren't exhibiting the rapid recoveries they made on the two previous dips. If a recovery is occurring, it's looking labored, at best. However...
    It must take genuine-seeming dark prospects to get seasoned professional investors to sell low and buy high, but these are the kinds of large-capitalization investment organizations that drive the markets. Outsmarting them, and buying when everyone else is selling, and selling when everyone else is buying, must take nerves of steel. You know when you contemplate deep dips in the markets that something wicked had to spook the pros into generating those deep dips. The reasons for selling must seem wholly authentic and compelling. But with 20/20 hindsight, they weren't.
2008-5-27:  The S&P 500 rose about 0.6% today (see below),
while the Nasdaq climbed about 1.6% (see below).
    Note the contrast between the Nasdaq and the Dow. The Dow looks as though it's breaking down, while the Nasdaq looks as though it's recovering nicely from a pullback.
    Meanwhile,  the VIX has climbed above 20, and fallen back to close at 19.64... still a long way from terror.

2008-5-23:  The market took another dive today, dropping more than 1%. The Dow has dropped 600 points this week to 12,480, or almost 5%. The S&P 500 is down 65 points to 1375, or about 4½ %. I had mentioned the dangers of a VIX level of 16.3 on Monday and Tuesday of this week pointing to a market turnaround, but I didn't listen to my own advice. (In addition, on Monday, stock indices had risen sizably and had then retreated to close quite a bit lower, which is another mark of a market top.
    As of today, my market advisory services are still considering this a normal pullback in an ongoing bull market. The VIX level has risen to 19.55. That's still a long way below the "blood running in the streets" level of fear (in the 20's or 30's) that appears at market bottoms. An S&P level of 1320 to 1350 is what the pundits are prophesying for an intermediate market bottom. In the meantime, to effect the kind of selling by skeptical professional investors that brings the markets that far down in spite of the fact that they've been through this scenario over and over again is going to require a near-certainty that the economy is going to utterly collapse.
    A look at the chart of the S&P 500 shows that the current trough is about as deep as the valley that appeared during the second week in April. But a more significant view of this might be found in the third chart down (the one-year chart showing the VIX plotted against the S&P 500). The current VIX trough looks like a carbon copy of the VIX dip that occurred last October 11th. On the other hand, the market spent two months building a bottom, with months of high VIX levels. Also the stock market is lower than it was, meaning that stocks are better bargains than they were last October. (Thanks to overseas earnings, earnings are still slowly growing as of the most recent numbers.) But in the end, it doesn't matter what the chart patterns say: it's what's going to happen to the economy six to nine months out that determines what the stock markets will do. We'll see.

2008-5-22:  The market eked out a slight gain today, buoyed by a drop in oil prices. The reason for yesterday's hollow was, among other specters, the Fed's halving of its outlook for the rest of the year, coupled with a "no-more-future-rate-cuts-no-matter-what" mindset.
    One of my investment advisory services characterized this current drawdown as being a typical market pullback and possibly having farther to go. The VIX index dropped to 18 from yesterday's 18¾. Clearly, to produce a market pullback, the news has to be quite bad. You don't get all those professional investors to throw in the towel unless the outlook appears surpassingly grim. We'll see.

2008-5-21:
  The market took it on the chin today, with the Dow having dropped 400 points over the past few days, and the S&P down another 1.5% on the day. The causes of these reversals was, first, oil at $133 a barrel (tonight at $135), and notes from the Federal Reserve cutting the anticipated 2008 growth rate from 1.3% to 2.0% to 0.3% to 1.2%, In the meantime, the Fed raised the anticipated unemployment rate from their previous range of 5.2%-5.3% to 5.5%-5.7%, and raised their inflationary expectations by a percentage point.
    One of my investment advisory newsletters thinks that the primary bull market is still intact, but that the market could decline to 1320-1380 before it turns around. (It's presently at 1390.)

2008-5-20:  The Dow dropped about 200 points or 2 2/3rds% today, while the S&P 500 and the Nasdaq both declined a little less than 1%. The VIX rose to a peak of 18.4, but fell back to 17¾ at the close. Of course, at any time, the stock market could go into a long-term decline, and this current upwelling could be retrospectively described as a trap in an ongoing bear market, but my best guess is that today's dip was to be expected, and that it fits the chart below just as you might expect. The stock market has risen for five days in a row, and an air of complacency and inevitability had begun to fill the air, so it's time for a pullback. The stock market will climb a wall of worry, backing and filling all the way. In order to get thousands of professional investors to retrench, the news must be sufficiently apocryphal that they flinch. Otherwise, they wouldn't back off. Since its March low, the S&P 500 has been rising by about 10 points a week, from an intra-day high of about 1,360 on March 24 to an intra-day high of 1,440 exactly 8 weeks later on May 19. A 10-point-a-week climb would lead to a 260 point rise to 1,700 on the S&P by late November, in keeping with the idea that a sustained market advance is normally stretched out over a period of months, with lots of peaks and valleys along the way. Of course, the actual peak will be whatever it will be.
    There are many articles warning of the immense financial and geopolitical risks facing us right now. I took these warnings to heart last winter, to the point of liquidating most of my holdings. Only recently have I minced my way back into the market. However, the S&P has spiked at 1,440 yesterday (May 19), up 183 points from its March 17 intra-day low of 1,257, bringing it to a point only 136 points below its October 11, 2007, intra-day high of 1,576. In other words, as of yesterday, it had recovered 57% of its all-time high. A "black swan" event like hostilities against Iran or a major terrorist attack on the US could deep-six the markets at any time, but that's a risk I guess we have to take.
    I'm quite concerned about where the economy will go after the election. At some point in the not-far-distant future, the Fed will find presumably find it necessary to raise interest rates. The first rate increase may not derail the stock market: the usual rule is "two steps and a stumble": The first two interest rate hikes don't traditionally unhinge the markets, but the third rate increment traditionally signals a downturn. But barring the unexpected, rate hikes aren't anticipated before October.
2008-5-19:
  The markets ended the day mixed, with the Dow up 0.3%, the S&P up 0.1%, and the Nasdaq down 0.5%. The VIX jumped 3%.
2008-5-16:
  The markets ended the day essentially flat. However, Mark Hulbert, publisher of the Hulbert Financial Digest, observed today that his comparison of the best market timers with the worst market timers shows that while, in March, the difference in recommended stock market commitment between the best and worst market timers with 20-year track records was 21% , it now differs by only 7% for those market timers followed over this 20-year period. (Over 5, 10, and 15-year time frames the differences range from 25% to 40%.) He also mentions that the stock market rally has stalled over the past two weeks. (Note, though, that although  the Dow Jones Index and S&P 500 Index advances have slowed, the Nasdaq Composite Index, .IXIC, has continued to climb steadily, as shown below.)
    Another potential source of concern is the volatility index, VIX. This index peaks at market bottoms and troughs at market tops. Right now, it's at approximately the same level (16.3) that it was at when the market hit its all-time high of 16 last October. (See the one-year VIX chart at the bottom of this page.). However, the 10-year chart below suggests that the VIX index can initially fall abruptly when the stock market comes up off a major bear market bottom, as it did in 1998 and in 2002. Still, there is the suggestion here of worrisome events that will slow the decline of the volatility index, including a short-term, intermediate-term, or long-term market decline. At the moment, I'm relying upon my own counsel, since I haven't yet seen any current discussion of the VIX. Until further information is available, I'm treading a bit cautiously.
2008-5-15:
  The markets rose about 1% today, closing a little above the trading range they've been in. The most likely next move is downward. That's been happening every Friday for the past few weeks. 
2008-5-14:
  The chart tells it all. (No real news.)
2008-5-13:
  The markets went nowhere today. The S&P 500 dropped from 1,403.58 to 1,403.04. The VIX index was likewise unchanged.
    The longer the markets trade within a tight range, the greater the odds that they will break out on the high side.
2008-5-12:
  The stock market rose a little more than 1% today. The bad news is that the VIX (volatility or "fear" index) dropped about 11% when, according to one of the technical advisory newsletters that I got early this morning, it should have risen 10% to 20%. The problem is that the VIX is low at market tops and high at market bottoms. My advisory newsletter, written over the weekend, suggested a further erosion of the S&P 500 index from its Friday closing value of 1,388 to around 1,360 along with the aforementioned rise in the VIX "fear index" from 20 to 22 or 24. Instead, the stock market rose while the "fear index" dropped to 17.8, so a further fall in the stock market could still be in the offing within the framework of a minor market pullback. But we'll see.
2008-5-9:
  The stock market fell 2/3rds% today. It's now a little more than 2% off its previous high. One of my investment advisory newsletters advised today that this is a to-be-expected pullback after a rapid rise since March 17th. The newsletter advised using this as a buying opportunity, and said that this downdraft probably has a bit farther to go. But the underlying primary trend remains up. This is the kind of expert guidance that makes me a bit more comfortable about treating this as a breather in a bull market. But the levels of fear are probably going to have to rise to the point where the professional investors are thinking that the stock market may be getting ready to collapse before the market suddenly turns on them and pulls the rug out from under them yet again--Lucy and the football--and resumes its upward trudge. 
2008-5-8:
  The stock market rose about 0.4% today, and it was probably a "dead cat bounce" after yesterday's hefty losses. I lack expert guidance tonight. My vague notion is that the level of fear will have to move a little higher and the stock market a little lower before it turns around and moves to new highs. But my  instincts are wrong more often than they're right.
2008-5-7:
  The stock market indices pulled back substantially today, falling by about 1.6%. Presumably, this is because the markets have had a sizable run lately, and are overbought and ripe for a correction, as the chart below shows. (This chart has been taken from The Fidelity Group's Active Trader Pro website.) (Fidelity offers the investing public a number of free tools and services, in addition to allowing Fidelity customers to trade other fund companies' no-load mutual funds without paying a transaction fee.)

The volatility (fear) index, VIX, has rapidly gotten too optimistic, characteristic of a short- or intermediate-term top in the stock market. 
 Of course, there's no guarantee that this isn't a mini-bull market in a longer-term bear market. If this is simply a correction in an ongoing bull market, then today's move could present a good buying opportunity. On the other hand, if the market is going to plunge from here, this could represent a good selling opportunity. (This is why stock market timing is so treacherous. Still, the best market timers are calling this a good buying opportunity.) I'll wait to see whether the market is going lower. If I were still buying stocks/funds, I might buy part of them now and part of them later.
    Assuming that the markets do recover from their current swoon, the stock market indices wouldn't be expected to surpass their earlier highs until later this year, so a lot of backing and filling and of building intermediate levels of support may be expected over the next six months. The markets rarely go up very many days in a row without a pullback.