Self Magazine

Once a year Market Updates suggests donations to a cancer organization. This is NOT that time. However, check out the following article from Self magazine (page 178) One of my daughters (a cancer survivor) is flying over a mogul on her snowboard to raise awareness for health.

Presidential Debate

FOX, CNN,CBS reaction groups and NBC and Survey USA polls all had Obama winning the debate. One poll has Obama/Biden winning the previous debates by 50 to 29%. Interestingly McCain seemed afraid to bring up any of the negatives charges he and his surrogates have made over the last few days. (see past Updates) Perhaps because Obama was there to defend himself. Often elections are not won on issues, debate and substance but mudslinging.

These negative accusations will get worse as the campaign continues. The Associated Press has already called one of Palin’s attacks "racially tinged" and factually lacking.(see past Updates) Look for a kitchen sink of more obvious racial ties to negative black figures and Obama. This worked in a Senatorial race in Tenn. 2 years ago when the Dem’s ran a black candidate and will probably happen again.

McCain who would not even look at Obama in the first debate referred to him with contempt as "that one" in this debate. As stated before a McCain/Liberman ticket would have been formidable because it would been sen as a move to bring this country together. Instead McCain choose an under qualified, inexperience, far right, religious radical as his VP. When you add this to McCain’s obvious temper and distain for those who disagree with him you get a a very frightening combination.

Cheney/Bush did not go radically negative till after the the elections and 911 – You were "unpatriotic, hated, democracy or did not support the troops" came after the 2000 elections.. Some negative stuff/exaggerations obviously makes it into all campaigns but the latest goes way over the top. LINK to video

FEAR

Obviously fear is driving worldwide markets. This started because we did NOT have proper regulations and enough enforcers in our financial markets . Now this crisis exploded across the world and what was originally thought to be a slowdown in US markets has turned into a worldwide meltdown. First there was Enron, but the real first warning came in this collapse was Bear Sterns. One could spend days assigning blame. But what’s really on the minds of most folks now is how low will we sink and what’s can be done about it.

How low will we sink? Standard bear markets since WW 2 have fallen on an average of 33%. The S&P 500 has all ready fallen 31% from its high. However, according to almost everyone this financial crisis is not standard by any means. Most experts are calling this the worst financial meltdown of our time or since the great depression. So it sure looks like there is more downside to come.

Fear is feeding on itself. Most technicians looks for a climax sell of to mark the bottom. This is when everyone throws in the towel. You have massive selling in huge volume for one to two days. Wish the Tea leaves showed a bottom, but they do not even though the VIX is at a new closing high. (see below)

to be continued…

Stocks

Best Advise

Being out of stocks is best for long term investors. Do nothing if you are already in stocks or sell some into rallies Make sure your $ are FDIC insured and money markets are SPIC insured. US Treasuries and real gold are out there for those who are in a huge panic.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index% ChangeVolume

Dow -5.11% -

NASDQ -5.80% -

S&P500 -5.74% -

Russell2000 -6.20% –

Headline – Coordinated Worldwide Rate Cuts

US Market & Foreign Markets

Major US markets had another massive meltdown yesterday and again hit new lows.

The benchmark S&P (is down @31% from its high. The typical bear market since World War 2 is a 33% loss. Virtually every analyst either calls this clear marks the greatest fiscal crisis since the Great Depression or the greatest crisis of our times. Therefore, it certainly looks like we will exceed the 33% loss a typical bear market has.

Volume was flat or down. Therefore, no real confirmation of the massive move lower. (Sorry the chart blocks the volume figures – see links below)

There was good news – The Fed announce it would open its discount window with 60 day loans to companies needing to make payrolls. However the fact that companies would need to use the Fed to meet payrolls spooked investors and markets fell. There was the usual bad news surrounding financial stocks as major bank’s seem to be coming up short in selling bonds and pieces of their companies in an effort to get more cash.

The Fed has become far more powerful and is using far more tools than ever before in this crisis.

The UK is partially nationalizing its banks LINK

Coordinated action around the world our Fed (0.50%) Europe. England, Sweden, & China all lower interest rates simultaneously. British markets were down 6% earlier and are now flat on this news.

This should rally markets today.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Credit Markets are Leading All Other Markets.

How Close is Credit to Freezing UP?

The 3 Month Treasury Bill/Bond dropped +91.46% to 0.785%. (note – there are some panicked folks that do not think the 3MTB is a safe haven) This is good news for credit markets. If the rally can follow through today with another gain that gets us above above 1.00% we could see some stabilization in stocks. Money if flooding out of stocks and into Treasuries.

LIBOR (definition) is still remained flat or rose depending on what measure you use (example 1 month, 3 month etc,) The spread between the LIBOR and the 3MTB Since the L in Libor stands for London and they seem to be nationalizing the banks there well have to wait to see how this all plays out.

3 MTB chart


OIL

Oil prices rose despite the fall in stocks +2.25% to $90.06 a barrel. Technically it looks like a support level is forming around $85 a barrel.

Chart of oil (WTIC)

The Dollar

The relative strength of the dollar is good news for the USA. It show that worldwide there is bore confidence in the USA than other countries.

Chart of Dollar

The VIX

Chart of VIX.

Fear reigns as the VIX is reached an all time closing high at at 53.68. It reached interday high of 58.24 two days ago. This is the highest the revised VIX has ever been. The extreme level of fear indicates an oversold market and the possibility of at least a short term bounce.

Short Term Outlook

Technically – Almost all technical indicators point to a short term rally. However fundamentals and specifically the credit market rule. If credit fears ease markets should rise.

Fundamentally – Psychologically fear has to play itself out and the high level of the VIX indicates we are near that point. If we had had massive selling and close at the lows of the day (down 800 on Dow) that would have been a classic bottom.

Best Read of the Tea Leaves . – Fundamentals and panic rules. These factors are trumping technical indicators that are all calling for at least a dead cat bounce rally because markets are so oversold and the VIX so high.

Note: There is a major difference between Traders who think of trades in hours, days and weeks) and Long term Investors who think of investments in terms of years and decades.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARISH

Technicals – The VIX gives a clear buy signal. (Short term traders only)
Fundamentals – financial mortgage transparency problem is far far far far far far far far far bigger than anyone thought. But there is hope in a bailout plan

(Caution – this “Outlook” is based on US equities and while US markets greatly influence other markets it is not necessarily the outlook for recommended sectors.)

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.

Asset Allocation/Recommended Sectors (long term)

* 85% to 100% Cash -

* 10% US Index Funds
UWM (2x what Russell 2000 does) & QLD (2X what the NASDQ does) Generally – Really Big Banks Look good

*5% Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall

Chief Strategy – Buy the dips of trending sector
Traders who have a strong tolerance for risk jump in on dips. Sell into rallies. Long term Investors who can tolerate very very high risk and are 100% in cash could nibble a little on big dips.

Changes to Bottom Line Section Bolded

As Always Do Your Own Research Before Investing

  • Share/Save/Bookmark