Think of the hits my little rally took this week. Ben B drew boos from the market with remarks suggesting the U. S. may be nearing a recession. Treasury Secretary Paulson didn't help matters with the two of them muttering dire forecasts about slow growth. Then on Thursday at a House Financial Services Committee hearing where New York Governor Eliot Spitzer said something needed to be done immediately to avoid a tsunami-like disaster. On the heels of that warning, Moody's downgraded the AAA rating of FGIC Corp. to AA. The negative response on Thursday killed a three-day winning streak for the market and effectively wiped out the gains from Wednesday's session that saw the Dow and S&P 500 gain 178 and 18 points, The market's consequent tirade could be looked at as a bit too obvious. Somehow through it all . Short and Sub-Intermediate Trends remain UP for all four Major Averages. The bounce is still alive. The February low hasn't been breached for any of the Majors and according to one source TSV is in leading divergences to the upside for all four. Whatever that means. It sounds good. Let's hang in there so long as these conditions remain intact.... I did my evil round trips and could easily be depressed here. Thank goodness some rational buyers came to the rescue late friday just not in my stocks. EMKR dropped a privately financed transaction a buck beneath the price! Thanks guys I know they just got $90 million in a tough environment to raise cash and as far as these sharky investores goes.. that's considered paying up. And they of course expect a double from here.... ah to just be one of them! Whatever, I'm down. The little guy. I Let a huge gain in YGE get away same crap, still up at least 5%-7% on most everything bought last week but the breakouts where met with sellers as can be expected. Will anything exciting enough happen on the upside to jolt us out of that? Probably not friends. Not short of a ticker tape parade welcoming our troops home. Now that practically everyone is either talking about or expecting a full-blown recession and bear market, it is less likely that the market will plummet to new lows in the coming days or weeks. Markets tend to collapse when the least amount of people are talking about it. This economy and market are far from secure against contraction and further decline, but at this juncture a bear market relief rally seems to be taking hold. In addition, the Bush administration, lawmakers on Capitol Hill and the Federal Reserve are conspiring to pull out all the stops to stave off any sustained economic contraction with rate cuts, the stimulus package and now the housing market bailout with the new "mortgage initiative." In the short run this may mitigate any market fallout as hope springs eternal. However, in the long run, if the economy is going to contract, anything the government does won't prevent it though it may speed up a recovery and minimize the pain of a slowdown... Or it could lead to a DOUBLE DIP set up which is the way I am leaning- we look like we avoid a recession growth goes positive the market silly silly rallies & explodes and charges up a thousand dow points or so and..... then come the dip part.... right back into a real recession with a fed out of bullets unless he had the guts to rapidly raise rates at the end of this year. A batch of economic data on Friday that included the lowest reading in a New York region manufacturing survey since May 2003 and the lowest consumer sentiment reading reported by the Univ. of Michigan since February 1992... What should not be overlooked in assessing Friday's economic data is that industrial production, a far more important economic number than the others, rose 0.1% in January and is now back to the record level hit in September. This report suggests there is no indication that manufacturing is contracting or going into retrenchment mode as almost always happens before a recession. Huh? What's going on here folks? Yes or No? As January Goes So Goes The Market? January 2008 was one of the worst Januarys on record. Even with the impressive 5.2% rally in the S&P 500 the last seven days of the month, it still lost 6.1% for the month. This was the sixth worst January in history for the S&P since 1930. The Dow's 4.6% drop was the fourteenth worst since 1901 and NASDAQ posted its worst January since it was created in 1971. Wow that cannot be good. Lets break it down to Jan's in Election years. Since 1950, election years have followed January's direction in 10 of 14 years with the four errors occurring when January was down! Two down election year Januarys were followed by full-year declines in 1960 and 2000. Of the six election years with down Januarys none produced a doubledigit gain and on average the S&P gained a paltry 0.5%. Down Januarys do have a remarkable record. Since 1950, every down January has been followed by a new or continuing bear market or a flat year with an average decline of 12.6% from the end of January to the subsequent low for the remaining eleven months. Wow WHAT A STAT FOLKS I'm FREAKIN' DEPRESSED THIS SATURDAY On top of the negative January Barometer a host of other readings were quite ominous. The Santa Claus Rally failed to materialize, the First Five Days were down and the December Low Indicator was triggered on the first trading day of 2008. In fact the first three weeks of the year were the ugliest opening to a year in recent memory. Also, the Year's Best Three-Month Span, November to January was atrocious. The last three months rank in the ten worst periods across the board. However, this is only the fourth time since 1901 that the Dow has been down in each of these three months in a row. The previous three instances 1932, 1942 and 1970 were in the midst of nasty bear markets nearing their ends. Major bottoms occurred in July 1932, April 1942 and May 1970. Could we somehow be bottoming already a four or five month bear market?... Though these previous bears had been in progress for over a year, this troika of monthly losses preceded a major bottom within six months. We just may have to wait a bit longer for the next massive buying opportunity. Certainly the argument can be made these January baromitors are pretty darn ugly and ominous and could be all the hints you need that this is a crash year... or that we are within six months of a final and true bottom an a new bull market... Which way do you see it? ~ stoney
Sigma may be an issue this next week. It seems a bit too obvious though... Barron's as could be expected ran with the blue ray story we all traded off last week... never underestimate the masses.... first watch stock for the week. SIGMA DESIGNS SIGM. ~ stoney
HOW TO AVOID RECESSION FOR COWARDS: The only SURE FIRE way to avoid RECESSION is to go live in Darfur Sudan and learn baking cowdung patties for lunch. Anything short of that is crawling in a fetal position and praying to a crumpled picture of Ben Bernanke on your pillow.