Brigitte
26.11.2000, 14:15
* * * *
11/25/00 Investment House Daily
* * * *
Investment House Daily Subscribers:
NOTE: Thank you for all of the kind thoughts and prayers for my son. I
am extremely happy to report that he came home Friday afternoon and is
going to be just fine. The kind words helped us through a very difficult
and trying time.
TONIGHT:
- The holiday relief rally finally emerges on Friday.
- Friday was a start, but the market has a long way to go with overhead
and remaining worries.
- Shoppers were out on Friday, but the economy is far from solid.
- Lots of economic news scheduled for this week along with more election
fun.
- Subscriber Questions
- Team Trades
After appearing ready to rally Tuesday, the market had its legs undercut
late Tuesday night by election news investors perceived as negative.
Wednesday was not pretty. The market then received what it perceived as
favorable election news Thursday and put together a relief rally on
Friday. That is the saga of the market right now: highly news driven,
vulnerable to negative stories, still in a downtrend.
Before Friday, the Nasdaq was down 20% from the close the day before the
election. Twenty percent is a bear market correction. It was down 47%
from its March intraday high (5132.52). Bear market times two. Friday
may have just been a relief rally after five straight selling sessions.
Of course volume was lower on the half day session, but volume at the
close at 1:00 ET was lower than it was at the same time on Wednesday.
While it is hard to take anything from shortened holiday sessions, it was
apparent that volume on this up day was even lighter than on Wednesday's
selling.
As with all new rallies there is hope that this one will carry the market
out of its doldrums. A half session of gains on light volume, however, is
not the cue to start buying heavily. As with all rally attempts we
ultimately have to see if the institutions are ready to support the move
with confirmation this coming Wednesday, Thursday or Friday with a big
gain (1%, preferably much higher) on rising, heavy, above average volume.
That tells us that institutions are buying on the move versus selling as
we have seen for the past three months. As we saw in October, it is not a
guarantee of a market rally. There is a lot of overhead, that is, buyers
at higher prices who are waiting for stocks to rally back up so they can
get out
'even.' With not many leader-caliber stocks in good bases, a lasting
rally is hard to come by at this point.
Still, we can short-term trade the rallies with bounces off of support,
split plays, etc., but we have to keep our eyes on resistance levels that
could kill the move and signal that we need to close those positions and
look for trades to the downtrend once again as stocks bounce down from
resistance and resume their downtrends. With the continuing overhang on
the markets in the form of the three 'E's' (election, earnings, economy),
it is hard to get too excited about rallies that may represent turning
points in the selling. Again, however, we will take and play a holiday
rally when it is presented, but once again we have to be ready to close
our short term positions when it starts to stall.
THE ECONOMY
Holiday shopping forecast slower.
Friday was a big shopping day with retailers reporting big crowds. The
day after thanksgiving, however, is no longer the barometer it used to be.
In 1999, the Friday after was the eighth heaviest shopping day. Moreover,
this year more than previous seasons, retailers are luring shoppers with
big discounts on items they believe are going to be the leading sellers
this holiday. Fearing a slowdown, retailers are trying to get buyers in
early and get them into the 'spirit' to open the wallets more.
The reason? It is anticipated that sales growth this season will be 3% to
4% versus the 7% growth last year. We feel the buying will be less than
this as consumers are pulling in their horns based on the economic
slowdown and higher energy prices. Greenspan had mused about the impact
of higher energy prices on consumer spending last month. What we are
hearing is that this is in fact happening; we will know more on Thursday
when the consumer spending numbers come out.
Third Quarter GDP anticipated lower.
Wednesday we will receive the first revisions of third quarter GDP on
Wednesday. Already it is anticipated that the 2.7% rate first reported
will be lowered to 2.5%, even 2.3%. Despite the Fed's claim that we would
see upward revisions in third quarter GDP additional information came in,
we are seeing the opposite. September, a traditionally strong month in
the third quarter, was not that strong after all. That means GDP was more
than halved in the course of one quarter. Lessened retail expectations
this holiday season will not be much of a prop for the flagging economy.
Jobless claims running at a 2-year high.
Despite the Fed's focus on the unemployment rate, the more accurate
measure of the labor pool, i.e., initial jobless claims, has been running
at levels representing a 2-year high. The unemployment rate is a lagging
indicator, meaning it shows where the employment picture was and gives
little idea of where it is going in the future. Weekly jobless claims
numbers, on the other hand, show that employment has and is loosening
considerably. Any number below 300,000 is considered a 'tight' job pool;
above 300,000 is considered no problem. Over the past two months, the
number has held consistently over 300,000, and in the past few weeks has
shot up to the 340,000 range. That shows a continuing weakening job
market moving forward.
Let's face it, forward is where the markets are looking; the Fed, however,
refuses to acknowledge this number as much as it did in the past. Indeed,
the Fed focused more on this weekly number back in late 1999 and early
2000 when it indicated a 'tight' labor market. Now that it does not show
a tight market, it has shifted to the unemployment number, apparently
attempting to put off the inevitable. If jobless claims continue on this
pace, unemployment will eventually catch up with the numbers. Another
thing to consider regarding the job market that the Fed feels is too
tight: we are now in the holiday season, and economists are not predicting
a slackening of jobless claims. Instead, the claims are forecast to
continue to rise even when the stores should be hiring a lot of seasonal
workers. The Fed is playing another round of 'hide the ball' regarding
the economy, but it is running out of places to hide. Each indicator it
carefully built up to 'important indicator' status is being undermined by
other more traditional, forward-looking economic indicators that show an
economy pointing nose down.
Apparently everyone will be shocked when GPD comes in negative in the
first quarter, but the market is showing us that it believes this to be
the case. How do you explain the fact that the Nasdaq has undercut its
highs from 1999 and is still probing lower? The economy has fallen below
the Fed's own proclaimed speed limit of 3% growth, and it is falling
further from there. Many Fed-loving economists said the Fed would not
lower the economy below its speed limit, apparently believing the Fed knew
exactly what it was doing. Well, the Fed has overshot that mark, and all
indications are that the economy is going to head much lower, indeed, even
start contracting. Why are not these same economists now calling for the
Fed to ease monetary policy and pump some liquidity back into the system?
The economy cannot grow without money. We have already seen productivity
fall off as a result of the Fed's actions. The Fed is close, if it has
not already done so, to wrecking many of the underpinnings that the Fed
itself said made this expansion work
11/25/00 Investment House Daily
* * * *
Investment House Daily Subscribers:
NOTE: Thank you for all of the kind thoughts and prayers for my son. I
am extremely happy to report that he came home Friday afternoon and is
going to be just fine. The kind words helped us through a very difficult
and trying time.
TONIGHT:
- The holiday relief rally finally emerges on Friday.
- Friday was a start, but the market has a long way to go with overhead
and remaining worries.
- Shoppers were out on Friday, but the economy is far from solid.
- Lots of economic news scheduled for this week along with more election
fun.
- Subscriber Questions
- Team Trades
After appearing ready to rally Tuesday, the market had its legs undercut
late Tuesday night by election news investors perceived as negative.
Wednesday was not pretty. The market then received what it perceived as
favorable election news Thursday and put together a relief rally on
Friday. That is the saga of the market right now: highly news driven,
vulnerable to negative stories, still in a downtrend.
Before Friday, the Nasdaq was down 20% from the close the day before the
election. Twenty percent is a bear market correction. It was down 47%
from its March intraday high (5132.52). Bear market times two. Friday
may have just been a relief rally after five straight selling sessions.
Of course volume was lower on the half day session, but volume at the
close at 1:00 ET was lower than it was at the same time on Wednesday.
While it is hard to take anything from shortened holiday sessions, it was
apparent that volume on this up day was even lighter than on Wednesday's
selling.
As with all new rallies there is hope that this one will carry the market
out of its doldrums. A half session of gains on light volume, however, is
not the cue to start buying heavily. As with all rally attempts we
ultimately have to see if the institutions are ready to support the move
with confirmation this coming Wednesday, Thursday or Friday with a big
gain (1%, preferably much higher) on rising, heavy, above average volume.
That tells us that institutions are buying on the move versus selling as
we have seen for the past three months. As we saw in October, it is not a
guarantee of a market rally. There is a lot of overhead, that is, buyers
at higher prices who are waiting for stocks to rally back up so they can
get out
'even.' With not many leader-caliber stocks in good bases, a lasting
rally is hard to come by at this point.
Still, we can short-term trade the rallies with bounces off of support,
split plays, etc., but we have to keep our eyes on resistance levels that
could kill the move and signal that we need to close those positions and
look for trades to the downtrend once again as stocks bounce down from
resistance and resume their downtrends. With the continuing overhang on
the markets in the form of the three 'E's' (election, earnings, economy),
it is hard to get too excited about rallies that may represent turning
points in the selling. Again, however, we will take and play a holiday
rally when it is presented, but once again we have to be ready to close
our short term positions when it starts to stall.
THE ECONOMY
Holiday shopping forecast slower.
Friday was a big shopping day with retailers reporting big crowds. The
day after thanksgiving, however, is no longer the barometer it used to be.
In 1999, the Friday after was the eighth heaviest shopping day. Moreover,
this year more than previous seasons, retailers are luring shoppers with
big discounts on items they believe are going to be the leading sellers
this holiday. Fearing a slowdown, retailers are trying to get buyers in
early and get them into the 'spirit' to open the wallets more.
The reason? It is anticipated that sales growth this season will be 3% to
4% versus the 7% growth last year. We feel the buying will be less than
this as consumers are pulling in their horns based on the economic
slowdown and higher energy prices. Greenspan had mused about the impact
of higher energy prices on consumer spending last month. What we are
hearing is that this is in fact happening; we will know more on Thursday
when the consumer spending numbers come out.
Third Quarter GDP anticipated lower.
Wednesday we will receive the first revisions of third quarter GDP on
Wednesday. Already it is anticipated that the 2.7% rate first reported
will be lowered to 2.5%, even 2.3%. Despite the Fed's claim that we would
see upward revisions in third quarter GDP additional information came in,
we are seeing the opposite. September, a traditionally strong month in
the third quarter, was not that strong after all. That means GDP was more
than halved in the course of one quarter. Lessened retail expectations
this holiday season will not be much of a prop for the flagging economy.
Jobless claims running at a 2-year high.
Despite the Fed's focus on the unemployment rate, the more accurate
measure of the labor pool, i.e., initial jobless claims, has been running
at levels representing a 2-year high. The unemployment rate is a lagging
indicator, meaning it shows where the employment picture was and gives
little idea of where it is going in the future. Weekly jobless claims
numbers, on the other hand, show that employment has and is loosening
considerably. Any number below 300,000 is considered a 'tight' job pool;
above 300,000 is considered no problem. Over the past two months, the
number has held consistently over 300,000, and in the past few weeks has
shot up to the 340,000 range. That shows a continuing weakening job
market moving forward.
Let's face it, forward is where the markets are looking; the Fed, however,
refuses to acknowledge this number as much as it did in the past. Indeed,
the Fed focused more on this weekly number back in late 1999 and early
2000 when it indicated a 'tight' labor market. Now that it does not show
a tight market, it has shifted to the unemployment number, apparently
attempting to put off the inevitable. If jobless claims continue on this
pace, unemployment will eventually catch up with the numbers. Another
thing to consider regarding the job market that the Fed feels is too
tight: we are now in the holiday season, and economists are not predicting
a slackening of jobless claims. Instead, the claims are forecast to
continue to rise even when the stores should be hiring a lot of seasonal
workers. The Fed is playing another round of 'hide the ball' regarding
the economy, but it is running out of places to hide. Each indicator it
carefully built up to 'important indicator' status is being undermined by
other more traditional, forward-looking economic indicators that show an
economy pointing nose down.
Apparently everyone will be shocked when GPD comes in negative in the
first quarter, but the market is showing us that it believes this to be
the case. How do you explain the fact that the Nasdaq has undercut its
highs from 1999 and is still probing lower? The economy has fallen below
the Fed's own proclaimed speed limit of 3% growth, and it is falling
further from there. Many Fed-loving economists said the Fed would not
lower the economy below its speed limit, apparently believing the Fed knew
exactly what it was doing. Well, the Fed has overshot that mark, and all
indications are that the economy is going to head much lower, indeed, even
start contracting. Why are not these same economists now calling for the
Fed to ease monetary policy and pump some liquidity back into the system?
The economy cannot grow without money. We have already seen productivity
fall off as a result of the Fed's actions. The Fed is close, if it has
not already done so, to wrecking many of the underpinnings that the Fed
itself said made this expansion work