Obviously Sunday’s General Colin Powell’s endorsement of Obama is significant. Powell is a Republican, former National Security Advisor, Secretary of State, genuine hero and maximum contributor ($2300 in February) to the McCain campaign.


* "unsure" about economics as last few weeks have shown – "Every day a different approach."
* Palin "not ready to be President" and indicated a "troubling further rightward shift" – Questions McCain’s judgement in choice
* The "central focus" of the recent McCain campaign is about Obama’s "very very limited relationship with Bill Ares" goes "too far" and is not accurate
* Troubled by McCain campaign, Palin and senior Republicans trying to "polarize Americans" in the last few weeks of campaign.


*Impressed by – "steady" "intellectual curiosity" "breath of knowledge," "shows intellectual vigor."
*His campaign has become broader and has become more inclusive while McCain campaign has become narrower.
*Has both "style," " substance", and "rhetorical ability" Can "inspire" both Americans and the world
*A "transformational figure."

Newspapers are also endorsing. Last year Kerry edged out Bush by 213 to 205 newspapers. So are Obama has 112 to McCain’s 39 newspapers.  27 papers have changed their 2004 views from Republican to Democrat . Of course what matters is those papers in the "swing" states. Most of these papers are echoing the views that Powell presented.

Bottom Line – Despite all this good news for Obama the race will tighten because negative campaigning works and the next two weeks are going to get a lot worse.

Bernanke endorses second stimulus package

In front of a congressional panel Fed Chair Bernanke endorsed a second stimulus package.

This proposal has long been championed by Obama and Democrats. It was surprising to see a Republican appointed Fed chair make this statement of support two weeks before an election. The end result was the Dow up 400+ points



Index % Change Volume

Dow +4.67% down
NASDQ +3.48% down
S&P500 +4.77% down
Russell2000 +3.88% –

Headline – Strong Rebound/Weak Volume

US Market & Foreign Markets -

Technicals – Another major move in the last hour of trading. This time stocks soared and volume did not confirmed the move higher.- Volume was both well below average Volume the chief confirmation factor did NOT confirm the rally. Again a major, this time 200 point move in the last hour of trading. Major institutions were not buying and without them the rally will not go far, but -

Every market technician is looking at 3 factors that scream rally

1) This weeks trading pattern had a "double bottom."
2) A climax big volume sell off last week
3 An oversold market

A breakout over Monday’s high would establish a short term bullish pattern.

Fundamentals – Good news in Credit Markets (see below)

Both the LIBOR (moving down) and the # Month Treasury Bond (moving up) are showing credit fears abating and giving hope to stock investors

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the the tail won’t wag.

The 3 MTB exploded higher +30.77% yesterday to an interest rate of 1.02%. This is very good news fro the credit markets. o.435 is not a great number, but the improvement is. Another few days like yesterday and a whole lot of money will come off the sidelines and hopefully into stocks.

Set up below is another new link to LIBOR 3 month chart. Here’s a link to a definition from Investopedia

As the chart shows the LIBOR, while still very high but taken a dramatic drop since the revised rescue/bailout plan of buying equity in banks has been accepted) LIBOR in a week has dropped from 4.8% to just above 4%. We still have a long way to go. LIBOR should be a lot closer to the 1.5 % Fed rate but the trend is very clear.

LIBOR chart (3 month)

Treasury Bonds

Bottom Line – Banks are not leading to other banks, but the commercial leading market is opening up. This helps Main Street’s access to credit cards to adjustable mortgage rates.


Basically stocks go up so does oil. Stocks go down so does oil. So oil too moved up +3.13% and ended the day at at $74.39.

Chart of oil (WTIC)

The Dollar

Chart of Dollar


The VIX (measures amount of fear/volatility in S&P) This is a contrarian indicator. The VIX is easing back down from its record highs

Chart of VIX.

Short Term Outlook = Rally!

Most everyone is following the Dow instead of the benchmark S&P 500 so lets take a look at the major resistance levels that need to be broken. Dow now stands at 9281. the high last week was 9794 and the major resistance level is 10,000. At that level you may see some money jump back into the markets further accelerating the rally.

Still buy the dips till we reach resistance at 10,000. Also remember this euphoria over the credit problems easing does not factor in a possible major major recession. See yesterday’s Updates on the CDS problem and Nouriel Roubini’s forecast.

The best thing that could happen today for bulls is a Dow that is flat or has meager (up to 200 points) losses in light volume. Big move higher are subject to large falls. Once the Dow reaches above 9,794 a bullish reevaluation of the rally will occur.

CAUTION – Volume has not confirmed the move higher. Till this occurs this whole rally is suspect.

NOTE WELL – Right now all the sectors that have got clobbered on the way down are leading the charge higher (example banks and energy) Not the traditional sectors like tech and small caps that usually lead us out of recession.

Personally I’m now over 10% back into the markets. Buying on dips. and plan to reach 15 to 20% invested ASAP. However did sell into yesterday at close. I’ll again buy any dip.

This market is a traders dream. Buy dips sell into rallies.


Long Term Outlook – Cautiously Bearish

Technicals – Double bottom has formed, advance in strong , increased volume, and a new high on VIX -Technically all this = at least a short term rally and maybe a long term bottom.
Fundamentals – financial mortgage transparency problem is far far far far far far far far far bigger than anyone thought. New worldwide rescue plan offers hope, but this rally is going to be a bumpy ride because retail investors trust has been shaken. Global growth is obviously slowing

People feel like we are in a recession. The actual strict definition – 2 quarters of negative GDP growth has not occurred. How bad the recession will be is be is the major question. It’s beginning to look like the recession might last through 2009 – perhaps longer

Asset Allocation/Recommended Sectors (long term)

* 75% to 100% Cash – This depends on your risk tolerance

* 10+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X what the NASDQ does) DDM (ETF that does 2X what the Dow does)
*5% Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk
*5% Alternative Energy
GEX(Alternative energy ETF) (If Obama wins you will see this sector flourish)

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market- over the 8 Bush years the Dow has gone from 11,000 to 8,500 and uncertainty clouds the future. The major trend is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on dips. Do not buy into rallies.

Shorting – Three ETF that short 2x what the the major indexes do -
TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

Changes to Bottom Line Section Bolded .
As Always Do Your Own Research Before Investing

  • Share/Save/Bookmark