Will the Bear Market Rear Its Head This Week? 17 comments
Daniel Shepard
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We are in a bear market, but stocks don't seem to know that. We saw a very volatile, but all around incredible performance turned in last week, by all the major indices. The tech-laden Nasdaq added 4.5%, the Dow was next with 3.6% and the S&P 500 tacked on 2.9%. Considering that the S&P 500's gains were tabulated from the moves of five hundred stocks, that was an impressive performance that shows how broad-based last week's rally was.
That however, was last week. As aforementioned, we are in a bear market. Furthermore, there are some negative overbearing issues that should have weighed in on the market last week that were completely ignored, but we might have to account for them this week. These issues include:
- Russia invaded the independent country of Georgia. Under normal trading circumstances, to the extent that Russia is a major energy producer, oil prices should have been impacted to some degree, but this was not the case last week.
- While not entirely unexpected and not new news for those looking at things from a commonsense perspective, worries are now emerging that a weakening economy will not be limited to the U.S. and more specifically, investors are now concerned about the Eurozone after European Central Bank President Trichet forecasted that economic growth will be weak through the third quarter. Instead of stock markets tanking across the board, that is locally and internationally, the dollar was instead seen as a safe haven and rallied, which sent oil prices lower, which sent U.S stocks soaring.
Looking ahead we have the following issues to deal with:
- We know the dollar cannot continue in a straight line upwards. It could possibly put in another phenomenal bullish week this week, but at some point in the very near future, it will need to undergo a retracement. Since a weak dollar is good for oil, then maybe we can assume that the inverse holds true as well, thus any weakening in the dollar will send stocks lower.
- Several major mall stores and retailers including JCPenney (JCP), Kohl's (KSS), Abercrombie & Fitch (ANF), Macy's (M), TJX Cos. (TJX), and Wal-Mart (WMT) will be reporting their latest quarterly earnings this week. It will be a major miracle if as a group, they all come out with earnings and future guidance that impresses Wall Street. To the extent that as retailers, their financial performance is a direct reflection of the state of the consumer, bad news out this week from the retailers is not something Wall Street could ignore. Then again, over the past few weeks the street has shown a propensity to not only ignore what should be considered bad news, but in some cases, even reward it.
On Sunday, Treasury Secretary Henry Paulson, appeared on NBC's "Meet The Press" with Tom Brokaw. Tom Brokaw asked him whether the govt would put money into Fannie Mae (FNM) and Freddie Mac (FRE), below is a transcript:
Tom Brokaw: "You have the ability now to insert money into Freddie Mac and Fannie Mae, do you think that that's gonna become necessary given the size of these losses?"
Henry Paulson: "Well we have no plans to insert money in either of those institutions. I think it was very important that we get these temporary back-up facilities because Fannie and Freddie are very important to our capital markets broadly. There's $5 trillion dollars of securities that they have astounding, $3 1/2 trillion in the U.S. and $1 1/2 trillion outside of the U.S.and they're responsible for funding about 70% of the mortgages in the United States today and so a key to our getting through this housing situation, housing correction, and getting some stability, is that we continue having mortgage financing available."
While we believe that despite the above comments, the government will do whatever is necessary to keep these companies afloat as they very well should considering that the mortgage market would virtually shut down without an after market, these comments should not be good for these two stocks this week, as traders may not be of the view that Paulson apparently holds, which is that enough has been done already, to ensure Fannie's (FNM) and Freddie's (FRE) survival. If these stocks trend down by much, then they might drag down the other financial stocks as well.
Stock position: None.
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This article has 17 comments:
Sell the dead cat's bounces,buy Gold,Oil,Nat Gas,Lumber,Silver,Suga... and everything that have value and is used on the planet earth,your stocks are the worthless electronic signs that have no value in real terms,we are near the crash of Titanic and only commodities investors will survive,the public companies owners and insiders will retire rich and spend your money,hile you will be left holding your bankrupt bank's statement and see your holdings i Blue Chips down 70% on average.
SELL THE UGLY MARKET,BEFORE IT KILLS YOU!
Don't trust anybody!!!
The Dollar is stronger against the euro and pound... but not the yen... just means the europeans are going to start melting down as well... just not as NEARLY as bad as the high spending USA
US will soon reach "safe haven" status as people gravitate to the safety of these blue chips.
No one is going to invest in emerging markets after the Olympics, China is already down 50%. Europe is going into recession, Aus and NZ are getting there. They all have more overvalued real estate markets that the US.
MDR rules of the IRS (minimum distribution requirement).
How do you think the gov't. plans it's budget? The gov't. has a vested interest in the equities market. Why do you think the gov't. has set up the The Working Group on Financial Markets (also, President's Working Group on Financial Markets or the Working Group) created by Executive Order 12631 signed on March 18, 1988 by United States President Ronald Reagan.
One conspiracy theory regarding the Working Group refers to it as the Plunge Protection Team. This theory claims that the Working Group is an orchestrated mechanism that attempts to manipulate U.S. stock markets in the event of a market crash by using government funds to buy stocks, or other instruments such as stock index futures.
The term "Plunge Protection Team" was originally the headline for an article in The Washington Post by staff writer Brett D. Fromson, published on Sunday, February 23, 1997. He did not invent the term. It was added later by a copy desk editor as a sensational nickname for the Working Group.