The Dow was up another 64 points on Friday, which takes it within 45 points of a new yearly high. This is impressive, considering that the Dollar Index also advanced 0.6% that day. The decoupling of the Dow from the Dollar is a significant development. They have been trading in a closely correlated inverse relationship for months. Full Article
It does not pay to get bearish on this market. Not yet, anyway.
The Dow was down just 14 points on Friday, which set the stage for the surprise rally on Monday morning. The dollar weakened about half a percent over the weekend. Since U.S. equities are priced in dollars, the declining greenback creates buying pressure, since shares look cheaper to overseas buyers. We think this trend is likely to continue until the Dollar Index falls to its 2008 low, about 5% lower than Monday's close. Full Article
On Monday, the dollar finally rallied. A rising dollar is bad for equities, which is one reason the Dow was down 104 points. The greenback has been so badly kicked around that it really had no where to go but up. There has been so much gold-love and dollar bashing that someone had to call the cops on the monetary hoodlums. Full Article
We had some continuation of the selling on Friday, but on declining volume. The Dow was down 46 points and is testing support at the August high. As we noted on Friday, however, a slightly deeper pullback would be normal at this stage of the game (see chart below). We also wrote, “We would not get overly bearish at this point.”
After all, markets don’t move in a straight line, they inhale and exhale, they zig and they zag, they advance and then they back and fill to consolidate gains and test support. So far, that normal process appears to be underway. Full Article
Dow 10,000 has been a target for us at TSR since early April, when the venerable index was 3,000 points lower. The good news is that after a benign FOMC meeting on Wednesday, Mr. Dow’s average rallied strongly and came within 82 points of our intermediate-term target. Pretty good forecasting, eh? Full Article
Observers such as legendary fund manager Mohamed El Erian believe that the financial crisis has precipitated a sea change that will take the West to a ‘new normal.’ That would be a problem. Meanwhile, however, Wall Street has returned to the Old Normal and is on track to reach record levels of compensation this year. On the anniversary of the collapse of Lehman Brothers, President Obama scolded The Street, but little is likely to change now that the government has underwritten an $18 trillion sub-prime mortgage to the financial establishment. Things could turn out badly in the end, which is why we recommend investing in companies with no debt, such as China Fire and Security (CFSG). We also like Bucyrus (BUCY), which has a P/E of 10 and makes coal mining equipment. Full Article
Anecdotally, the smart money is skeptical of this rally, which is all the more reason to embrace it while it lasts. Markets have a way of embarrassing smart people. Our oft-stated target is Dow 10,000 and we are just 400 points away now. We recommend staying for the finale, but that does not mean we are bulls for the long term.
The market rally is likely to confirm investment advisors and financial planners in their traditional belief that stocks always go up. We think that is a mistaken view and discuss the more practical updates to modern portfolio theory, which include tactical allocation models to alternative asset classes, market timing and just plain trading.
We appreciate a good turnaround story and think there is one in Research in Motion (RIMM), whose shares sold off last year due to fears that the company’s dominance in the corporate smartphone niche would be eroded. That appears highly unlikely. Instead, RIMM may be making inroads into the consumer market. Buy RIMM. Full Article
The stock market is experiencing the typical September blues, which occurs annually due to mutual funds selling losers for tax loss purposes. Funds are also booking profits after a strong rally. Despite the bearish commentary in the media, we don’t think this is the end of the uptrend. Full Article
Creative destruction enhances the fortunes of opportunistic companies, but it can be a real ‘downer’ for those companies that do not adapt quickly enough to changing times. Deep recessions intensify the catabolic process, which means the losers will tend to fail spectacularly. Full Article
Thursday’s market pattern was the reverse of Wednesday, opening weakness was bought and once the rally made nominal new highs it was sold. Obviously, the market remains in a narrow trading range and awaits a definitive catalyst. Full Article
Post to Twitter