The Dow was up another 29 points on Friday and closed above 10,500, which is bullish behavior. The Dow Transports and Utilities, along with the Russell 2000 and the Nasdaq 100 all made yearly highs. The S&P is trailing due to weakness in the financial sector. Full Article
On Monday, the Dow closed up 76 points, only its fourth up day in the last ten trading days. The intraday action was volatile, however, with a range greater than 200 points peak to trough.
The volatility catalyst was a report from the Institute for Supply Management that indicated manufacturing activity grew in October at the fastest pace since April 2006. The 55.7 reading, if annualized, would imply GDP growth of 4.5%. Manufacturing activity improved worldwide, as well, suggesting that this is a synchronized global upturn. Things did not get better in Russia, however, and we think that country remains a short sale candidate. In other words, we are bullish on BIC not BRIC. Full Article
After Goldman Sachs upgraded Wells Fargo and Capital One, the die was cast for a bank-led rally and the market obliged. The upgrade was the only catalyst on the day, but it was enough. Why? Because after Thursday’s sharp downdraft, traders became bearish and the short sellers became emboldened. That psychological condition provides sufficient fuel for a counter-trend bounce. Full Article
Although there is unavoidable uncertainty in short and intermediate-term economic forecasting, over the long-term the World Bank and the IMF have proven correct in their macro-economic thesis concerning the relative outperformance of developing economies. Although we conclude that this performance differential cannot be accurately quantified, we see no reason to gainsay the general trend. Full Article
Last week we dismissed most stock market forecasting by so-called experts as no better than a coin flip, and possibly worse than random, if vested interests bias the advice. If markets eventually follow the economy, however, can we trust the economists to predict important turns? Hardly. Full Article
While we reiterate our advice from last week, namely, not to let your long-term perspective on the market or the economy (whether bullish or bearish) blind you to the legitimate money-making opportunities in the short to medium term, we also acknowledge that navigating the relationship between the two perspectives is naturally confusing. Full Article
Granted, when it comes to the Big Picture, we are one of the most bearish newsletters around. At the same time, we try not to let our long-term analysis blind us to the legitimate trading opportunities in the short to medium term, which is where money is made in a volatile market.
This week we attempt to clarify the opportunities in Chinese Telecom, which we think are considerable. Full Article
When General Motors filed for bankruptcy protection this past week, its 83-year tenure as a fixture within the Dow Jones Industrial Average also came to an end. Faced with the abrupt passing of an economic icon, the stock market rallied; a classic case of selling the rumor (fear of the unknown) and buying the news (increased knowledge of the future). This works in the reverse for good news. Full Article
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