FEBRUARY 20, 2008: Inflation showed up again today in the ‘hot’ CPI number. In January, core inflation rose 0.4% vs the forecasted 0.3%. Minutes from the last Fed meeting however indicated that the they would do everything they could to keep the economy from going into a recession. The Nasdaq celebrated by rallying 0.9% on heavier but average volume.
Retailers, oil drillers, and steel producers were strong today. Medical related, solars, and automobile stocks sold off. Transocean was up 7%. Research in Motion advanced 5%, and fertilizer maker Mosaic moved up 4%. Suntech Power dropped 12% and Sunpower lost 4%.
The Nasdaq is now 19% off it’s October highs. Stimulus packages, multiple rate cuts, bail-outs, etc. may have brought us a ‘counter-trend’ rally but have failed to change the direction of the markets, which is decidedly down.
Counter-trend rallies during corrections are by no means a signal to jump back in the markets. Bear market rallies can be sharp to the upside and come back down even faster. It’s best to wait for a ‘follow-through’ day and see top-rated stocks breaking out of proper bases before committing money to the long side of stocks.
Don’t forget that the banking system is in serious trouble, the housing sector is in ‘melt-down’ mode and the consumer feeling the pinch of higher inflation and less access to credit. More info at www.goldenticker.com
JANUARY 29, 2008: The Nasdaq gained 0.3% but volume was light again as traders await tomorrow’s Fed meeting where they are widely expected to cut rates by 1/2%. That would be a 1.25% cut in just a week, the biggest in 25 years. Some are saying that the Fed may have to cut rates below the current 2.5% inflation rate. Durable goods orders came in strong which may lessen the chance of a 1/2 point cut. Nevertheless, the Nasdaq has been rallying lately on falling volume-a sign that this unconfirmed rally could fail. Former leaders like Google, Amazon.com, and Apple are still below their 200-day moving averages-a major sign of weakness. Potash, Monsanto, and Deere have been holding up better than most stocks but are rallying on decreasing or ‘wedging’ volume. Counter-trend rallies during corrections are by no means a signal to jump back in the markets. Bear market rallies can be sharp to the upside and come back down even faster. It’s best to wait for a ‘follow-through’ day before committing money to the long side of stocks. More info at www.goldenticker.com
Paul Krugman warns of housing bubble and financial turmoil in September, 2006.
It’s great to see predictions a year later and see who got it right. Peter Schiff once again calls it right and “the most smartest investor” Ben Stein gets it wrong again.
