|
==========================================
INVESTANSWERS ADVISOR September 3, 2010
==========================================
IA Goals: Market education and disciplined strategy.
Philosophy: Successful investing is 75% about poker and 25% craps:
You just have to be better at it than half of the other players. Current market view: An overbought rally to start off the day. ============== MARKET UPDATE =============== Good morning everyone. YESTERDAY'S 50pt RALLY IS "PROOF" THE MARKET IS HEADING UP
Just before the closing bell yesterday, CNBC reporters were again
trying their best to act like technicians and teach viewers about how
easy it is to predict the future of the stock market. Bob Pisani said,
"The stength today was proof-positive that the market is going to
keep heading much higher" in Sept. We have one question to ask Bob, "Exactly what news came out on
Wed/Thurs to have any effect whatsoever on corporate health?"
The answer? None at all. Tele-analysts tried to explain that the
slightly better than expected Consumer Sentiment number or a
slightly better ISM value were the causes of a +300 pt Dow rally
Wed and Thurs.. The market comes and goes in multi-day waves and this was
just another bullish performance embedded in an overall bear
market. And while the magnitude of the rally did surprise us,
it certainly does not mean the rough days are over. This late-week rally was no different that the others this Summer.
While the upside to this one may not be over yet, each of the rest
have ended with Dow losses of -800 to -1200 points. There is a
little know fact that every CNBC commentator either ignores or
forgets: Over 80% of the best-performing days for the indexes
occur during bear market periods. And like all the other head-fake rally's this Summer, those who
buy at the peaks ALWAYS get burned. Another similiarity is
that once each of the past rally's matured after a week, all
the experts were telling investors to buy stocks again, and
every time they were wrong. We suspect they will be wrong
this time as well. The ISM data, consumer sentiment, and
today's jobs report were NOT very bullish. They were, however,
less bearish, and the end result was a sudden market bounce
that caught IA off gaurd for sure. The more important question now is, "With so much of the small
amount of available cash being spent on stocks again, where will
support originate for stocks if they happen to turn around for
losses again?" The reason Wednesday's rally was so strong was not because
of any econ data, nor because eps are suddenly getting better.
Late Wed and Thur were very strong because stocks were coming
off the worst August in 10 years and deeply oversold. Then the
S&P 500 bounced squarely off 1040 support coincidentally on
the first day of the month, which is when the heaviest mutual
fund buying takes place. There was eventually enough buying
early Wed morning to break through the overhead resistance
level we covered previously of 1065-1067. And once that level
caved-in, then the path of least resistance was the next technical
overhead stop at 1100. Sure enough, we will see this # hit at
the opening bell today. This week's rally was not caused by Jim Cramer's everyday
bullishness (which is downright boring) calling for a "BUY
BUY BUY", and it was not the ISM nor the Confidence data.
The market was due for a bounce. Whether it was from its
Tuesday's level of 9975, last week's 10,200, or from a much
lower level of 9800, a few hundred Dow points always comes
around while the market is in bear-mode. As a matter of fact,
many experts believe the Dow cannot even make lower levels
without first making these short rally's. This doesn't mean the S&P index is destined to stay above 1100
as a mater of fact, but it does mean that the mindset of a larger
number of investors is that the probability just rose dramatically.
Simply put, the upside breakout usually mens downside risk
decreased while the upside potential increased. The last two days
of bullish trading also meant the market was injected with a little
downside immunity from a potentially bad jobs number this
morning. Now that there have been 3 days of super-gains for stocks
(Dow up nearly 400), there should be a few days of "settling".
Then what happens is the market finds an "equilibrium" level
when the bulls meet the bears based upon the news of the week.
What follows after a few days of choppiness is a return to what
the underlying cash can support. There has been a record $80bil of OUTFLOWS from stocks so
far in 2010 and this is most likely the overriding trend that
will continue. We do not yet see any permanent shift in this
psychology. Bonds will carry the lion's sare of the cash.
ECON DATA 8:30am
Aug non-farm payrolls came in at a -54k jobs, which was much
better than the -120k suggestion. Futures had been flat before
the data moved to a Dow +110 within minutes after the 8:30am
release.
With the Bureau of Labor again assuming that even more
people decided they no longer want a job, they left the
unemployment rate UNCH at 9.6%. There is some VERY fuzzy math going on at the Bureau.
First-time unemployment claims are still running between
450k and 500k per week, job losses are running between
-100k and -50k per month, there are +250k new entrants
to the job market per month, and the Bureau of Labor tells
us that the unemployment rate is remaining steady at 9.6%
for the last 6 months. The fact of the matter is that this
country has NOT had any 2-months of positive job creation
for nearly 2 years. The REAL unemployment rate now sits at 16.7%. This is
the Bureau's U6 number that they don't want people to hear.
FUTURES/OPENING DATA
At the opening bell;
Dow +95, Nasdaq +20
Fair Value is n/a
S&P futures are +10.70
IA SSI value -4
SSI is a proprietary analysis of InvestAnswers' opinion of how
the equity markets will perform by the end of the day relative
to the opening values.
Scale -10 to +10. (-10 = most bearish, +10 = most bullish.) Investors should sell off the market into this morning's strength.
even if the market is destined for a higehr level next week,
the short term bullish sentiment comes on the heels of an
already very strong rally. This makes it susceptible for a bit
of profit taking. Very bearish sentiment is still in recent
memory. SSI -4
The IA Team
================================================================
Member Questions:
http://www.investanswers.com/ and click on the ASK US link.
Subscriber questions:
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
================================================================
DISCLAIMER: THE INFORMATION HEREIN HAS BEEN COMPOSED AS A SERVICE
TO ITS CUSTOMERS SOLELY FOR INFORMATIONAL AND EDUCATIONAL PURPOSES.
THE READER SHOULD VERIFY ALL MATERIAL ABOVE, AND DO THEIR OWN DUE
DILIGENCE BEFORE INVESTING IN ANY SECURITIES MENTIONED. THE USERS
OF THIS INFORMATION AGREE NOT TO HOLD INVESTANSWERS.COM OR ANY OF
ITS AFFILIATES LIABLE FOR ANY LOSSES THAT RESULT FROM ITS USE.
|
