Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Markets Targeting January Lows

Stock-Markets / US Stock Markets Mar 03, 2008 - 04:43 PM GMT

By: Paul_J_Nolte

Stock-Markets Book-ending the month of February were to big sell-offs that left investors wondering if we were on the precipice of something truly large in the way of another major decline. While the first decline was more the ending to a very poor January, the one on Friday has investors questioning their views on the economy and the implications for stock prices in the weeks ahead.


The overall economic news for much of the week was nothing to write home about, yet stock prices rose – until more bad news from the financial sector on Friday along with very weak consumer confidence (and less than terrific spending) was enough to get the sellers out in full force. Volume, for the first time in a month, was significantly higher on the declining days during the week, a trend that if it persists could spell more trouble in the months ahead.

The coming week is packed with juicy economic news, from employment (last month was terrible) to the manufacturing report from the ISM (last month was very weak). The last few weeks have shown new filings for unemployment have broken from their two-year sideways trend to territory that signaled large job losses during the '00-'03 recession. Friday's employment report risks being negative, and more importantly will be the revisions to the January report – could be another wild week in stocks.

The markets are just above their February lows and the news could get much worse before it gets better. Although inflation reports are higher than desired, the commodity markets are soaring, likely putting additional pressure on inflation in the months ahead. Everything from oil to grains to the products derived from those two (among them are plastics, chemicals, meat and milk). As we mentioned last week, the market internals are improving some, however no prior peaks have been surpassed and therefore to declare “a bottom is in” is premature.

Whether looking at the cumulative net advancing volume, the net advance decline line or momentum indicators, each has improved from their worst levels, however have not topped peaks set late in '07 let alone the October or June '07 peaks. As the market embarks upon a testing of the January lows, it is hoped that many of the indicators do not also go to new lows, setting up the possibility for a “positive” divergence that many will see as finally a bottom put in place. If the retest fails, the next stop is likely another 7% away from current levels. Unfortunately that could be reached rather quickly in a market that is prone to shoot first and ask questions later.

Normally the soaring commodity markets would be lethal to the credit markets – pushing rates higher as inflation fears are stoked. However this time IS different. Our analysis of the various markets shows that the two best performing are commodities (no surprise) and fixed income (big surprise). A year ago, 3-month treasury bills were nearly 5.2%, today just over 2.25%, while longer term maturities have declined some, and their move has not been as dramatic. There are two unanswered questions for bond investors: will the interest rate cuts stimulate the economy (as they have done in the past) and when will the lower rates begin to have an impact? The answers hold the key for equity investors.

By Paul J. Nolte CFA
http://www.hinsdaleassociates.com
mailto:pnolte@hinsdaleassociates.com

Copyright © 2008 Paul J. Nolte - All Rights Reserved.
Paul J Nolte is Director of Investments at Hinsdale Associates of Hinsdale. His qualifications include : Chartered Financial Analyst (CFA) , and a Member Investment Analyst Society of Chicago.

Disclaimer - The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable, but are opinions and do not constitute a guarantee of present or future financial market conditions.

Paul J. Nolte Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in