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Archive for October, 2008|Monthly archive page

OCTOBER HAS SEEN MANY STOCK MARKET BOTTOMS, US FED BAIL OUT FAILS TO INSPIRE CONFIDENCE, FEAR INDEX CLIMBING NEAR ALL-TIME HIGH

In Uncategorized on October 6, 2008 at 12:44 pm

STOCKS GENERALLY BOTTOM IN OCTOBER…. According to the Stock Trader’s Almanac, October has seen it’s share of stock market bottoms. Some of my short-term indicators also suggest the selling is overdone. These include the Bullish Percent Indicator, percentage of stocks above 50 day average price, and investor sentiment (as always e-mail me for details). The Almanac suggests the best six months for the stock market are about to begin. In fact, the S&P 500 has rallied in 8 of the last 10 years in the month of October. Let’s take a look at previous market that bottomed in October:

Chart 1

Chart 2

Chart 3

US FED BAIL OUT FAILS TO INSPIRE CONFIDENCE… The market shrugged off the $700 Billion US bail out package approved this week. Warren Buffet was interviewed by Charlie Rose this week and said “Confidence is like oxygen, when you have it, you never think about it. When you don’t have it, it’s ALL you can think about.” Click here for the entire interview: http://www.charlierose.com/shows/2008/10/1/1/an-exclusive-conversation-with-warren-buffett

Chart 4

FEAR STILL CLIMBING…The market’s “fear gauge” is climbing back towards 50 as the bailout fails to inspire confidence. Chart 5 shows the 60 minute chart hitting its high when the first bailout bill was defeated in the house last Monday. The all-time low was 9.89 on 1/24/07.

Chart 5

COMMODITIES FALL WITH EURO… Commodities generally go in the opposite direction of the US Dollar. The dollar had its largest weekly gain ever against the Euro this week, pushing commodity prices lower. The European Central Bank may have to lower interest rates to stimulate the economy. This makes the Euro less attractive versus the dollar, and puts pressure on commodity prices.

Chart 6

NDT COMMENT: Focus on capital preservation. I sound like a broken record, but “the one who loses the least in a bear market is the winner”. Warren Buffet put another $5 Billion to work this week, buying shares in General Electric. His investment is already underwater.

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