I found a previously unopened gift in our Christmas stocking yesterday —a lump of coal. On light volume, (not that it’s comforting), US markets defied holiday tradition and sold-off.
Major US averages have been in protracted trading ranges for most of 2005. Just when you think you’re going to make some progress in any direction, Mr. Market pulls the rug out from underneath you and puts you back in the range. I don’t know what to make of yesterday beyond that observation. Earnings and economic news has been generally quite good, but that’s known information. Pundits blamed the sell-off on the inverted yield curve. But this has been a known event for some time. The yield curve inversion is made easier by the contemporary comparison of short term interest rates to the 10 year Treasury bond; however, previous comparisons were to the 30-year Treasury bond, which if used today is not inverted to short rates.
No, folks. I believe there is something else bothering markets that is constraining prices from moving decisively higher. I don’t think anyone knows quite what that something is yet. Maybe Mr. Market will lead us in the opposite direction before we know the precise reason. We have to accept this reality.
As you can see by the chart of DIA, not much progress has been made in 2005. Often subscribers ask me why I don’t cover DIA -- this chart offers a good explanation:
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