I spent most of the night Sunday, and all of Monday in a dreary haze after attracting an intestinal virus. The cause has me a little puzzled. I don’t know if it was due to something I ate, natural, or all of the viral misinformation we keep receiving on the economy. From time to time, all of these things can make us sick.
When I returned back to my office bleary eyed, I was cleaning up some papers and old magazines, and ran across several past issues of Barron’s. As I began to throw some away, I ran into the October 23rd issue which read “Survivor! GOP Will Hang On.” Needless to say, I don’t think that many in the financial media have their fingers as close to the pulse of the average American like you and I.
The cover of November 6th issue of Barron’s proudly proclaims, “Next Stop 13,000?” The hedge in this headline is the question mark.
I have said it before, and I’ll say it again, I believe one of the major issues in the back of many voters’ minds when they went to the polls was the fleecing they took at the gas pumps. Sure, when asked about the situation in Iraq, voters responded negatively, but the price of gasoline ignited a fire that spread throughout the country.
Don’t get me wrong, Iraq is a very important issue, and my family knows firsthand about the tragedies of our dead and wounded soldiers. My step-son Robert Hill was in Fallujah (Iraq), and even as tough as he is, he still wakes up in the middle of the night thinking about the some of the things he experienced.
Here in La-La land, we continue to debate whether we will have a recession in 2007, a housing market that is searching for a bottom, and a consumer who is still hanging tough. By looking at the performance of the stock market, it is easy to say that everything will be fine.
Today, the “best of both worlds” market woke up to retail sales that fell for the second straight month -0.2% (better than expected), and a PPI number that fell more than expected -0.4%. So, the bottom-line is inflation is under control, and the consumer is still hanging on. It’s been a long time, but the last time I remember good and bad news being looked at as good was in the year 2000.
As the stock market continues to march higher, many respectable market strategists are puzzled at by markets performance. Heck, even corporate insiders who have sold billions of their own stock look like fools in this market. Well, they may look like fools now, but I have a sneaking suspicion that they know what their doing.
Believe it or not, the next levels of resistance for the major market indexes are as follows;
SPX 1400-1425
DJIA 12,500-12,600
NASDAQ 2375-2450
So far, the decline in the housing market has not been felt by the economy. Market strategists, who were right about their market predictions for 2006, are a little hesitant to make a prediction for 2007.
The wealth effect from home equity extraction has slowed, but the impact of adjustable-rate mortgage resets to come may impact households’ budgets much more in 2007. Thus far, this has not yet had a severe impact on the consumer. But, we are seeing signs of a problem brewing.- See Chain Store Sales
The stock market no longer telegraphs its moves. Even the widely followed (and well respected)
"Stock Trader's Almanac" is having its theory of seasonal tendencies and cyclical forces questioned. In July 2006, The Almanac Investor model stock portfolio was 75% in cash. They went on to say, "we feel that there is going to be a major buying opportunity later this year". And believe me, these guys are well respected and good at what they do.
What I am trying to point out is that seasonal tendencies have not been following their normal trends. Here are a few other headlines from the Stock Trader's Almanac going into the fall;
August 2006,"If the Economy Is So Strong, Why Isn't the Market? The Stage is Set — Wait for the Low".
September 2006, "A Summer Rally May Be Here But the Time Is Not Right on the Street".
October 2006, "Buoyant Market Testing Highs and Forecast Bullish Sentiment Rises — Bear Trap or Bull Run?
So, if you feel that you may have missed the boat don't worry about it, you're not alone.
