The Market is at a technically critical junction
Steve Cook on Disciplined Investing

Syndication

Have You Seen This?

News

  • Make money by accessing all our Portfolios, the supporting research and Price Disciplines using our paid subscription blog, Strategic Stock Invetments. Our work is focused on making money for our Portfolios not as some academic exercise in Internet investing. Check our performance (audited)--our Dividend Growth Portfolio has beaten the S&P by 500 basis points per year for the last seven years but with a beta of only .62. (Mandatory Disclaimer: past performance is not a guarantee of future results.) We give you everything you need to duplicate our results, in particular, a strict price discipline for both Buying and Selling.

Have You Seen This?


Economics

   This Week’s Data

    October factory orders fell 5.1% versus estimates of a drop of 5.4%. Ugh.

    November retail sales were weak:
    http://www.thestreet.com/story/10451310/1/november-retail-sales-post-steep-decline.html?puc=_htmlbooyah

    On the other hand:
    http://mjperry.blogspot.com/2008/12/underestimated-strength-of-economy.html

    November nonfarm payrolls declined a whopping 533,000 versus expectations of a 310,000 decline; unemployment rose to 6.7% versus forecasts of 6.8%.  This was as bad a number as one could have expected.
    http://calculatedrisk.blogspot.com/2008/12/employment-drops-sharply-unemployment.html

   Other

    The auto charade:
    http://www.cato.org/pub_display.php?pub_id=9819

    The estimated cost to the auto makers of the ‘jobs bank’:
    http://mjperry.blogspot.com/2008/12/cost-of-jobs-bank-2005-2008-4200000000.html

    Update on credit crisis indicators:
    http://calculatedrisk.blogspot.com/2008/12/credit-crisis-indicators_04.html

    Update on the per capita decline in the cost of living:
    http://bespokeinvest.typepad.com/bespoke/2008/12/the-commodity-rebate.html

Politics

  Domestic

  International War Against Radical Islam

The Market
    
    Technical

    More statistics on bear markets, their length and the recovery that follows:
    http://www.capitalspectator.com/archives/2008/12/history_isnt_bu.html#more

*************************************

    Yesterday, the indices (DJIA 8376, S&P 845) struggled within the boundaries of what I hope will prove to be a trading range, closing above their 10/10 low (DJIA 7853, S&P 839).  Disappointingly, intraday both Averages traded up to the downtrend (resistance) line (DJIA 8598, S&P 875) off their September high and failed to move above it.  Now with the much lower close, the S&P is a hair’s breadth from its 10/10 low support level.  Technically speaking that makes today a potentially critical day at least for the S&P--a seven point down move would break the 839 support level and would set up a challenge of the 11/19 low (739); while a thirty-one point rise pushes the S&P above the aforementioned downtrend line and opens the possibility to test the 985-1000 resistance zone. 

    On a positive note, the volatility index rose a little yesterday but, at least by recent standards, didn’t hint of a more aggressive move down in stock prices.  Further volume was much lower than that of the prior two days when stock prices increased.  Finally, yesterday’s sell off was attributed to investor concern over today’s jobs report (see above); to which I respond: that’s not news; everyone already knew that the employment picture was deteriorating. However, if this was indeed the case, then it seems to me that the old adage ‘buy (in this case sell) on anticipation, sell (in this case buy) on the news’ may be prove to the correct trading strategy; meaning that stocks could well bounce off the down opening.

    On the negative side, focus is returning to the magnitude of possible redemptions from hedge funds at year end.  This time the talk is that it could be as much as $200 billion.  If this is anywhere near correct, we could be faced with another period where stocks get relentlessly hammered day after day till year end comes.

    Bottom line:  Caution, managing our cash position and adhering to our Price /Disciplines remains the best strategy.  This could be a technically significant day; hence depending on the pin action, our Portfolios could be either a buyer or a seller.  If action is taken, I will be in contact via Subscriber Alert.





Posted 12-05-2008 8:23 AM by Steve Cook