Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Awaiting Economic Signals and Follow-Through

Stock-Markets / US Stock Markets Feb 05, 2008 - 12:29 AM GMT

By: Paul_J_Nolte

Stock-Markets Taking a cue from my old DJ days, this past week could be summed in a couple of tracks from some scratchy wax – Give The People What They Want and More, More, More. The Fed has cut rates by 125 basis points with the most recent 50bp cut in less than 10 days – and once done, the markets were wondering if there would be another 50bp cut before their next meeting at the end of March. It took the Fed a full month in Jan 2001 to cut rates by 150bp – in the midst of the beginning phase of a recession.


Today's economy may not be as weak, depending upon the economic series one prefers to view. The corporate side remains relatively strong – durable goods orders are higher and inside the otherwise poor GDP report, the business side looked to be in decent shape. However, the consumer is another issue, with spending down, confidence lower and still having “issues” with housing and slowing employment. With the consumer comprising 60-70% of the economy, it pays to watch what the consumer is doing (not just saying). Our expectation is the consumer will drive this recession, even though corporation should do OK, based in part on still strong foreign economies. While a nice gesture, the “rebate” proposed won't help consumers repair their stretched balance sheets only “Time in a Bottle” will likely make it work.

One week later, here we are at the very resistance levels we outlined last week – much as the markets crashed through various support levels on the way down, they are putting on a great show on the way back. Expecting that the fiscal and monetary stimulus will save the economy, stocks rallied putting in their best week since the bottom back in 2003. The good news is the short-term picture has certainly brightened, as volume has been expanding with the rallies and contracting (a bit) on the declines. The advance – decline lines are looking better, meaning better participation in the rallies.

While still not out of the woods, the action of the past two weeks has been encouraging. If the markets can clear some prior peaks or if the market internals could do the same, we would be much more excited about stocks. For now, this rally has the look of prior rallies since July ‘07; each rally higher has been short of prior peaks forming a stair-step lower. The market needs to begin building stairs that go up, instead of down, to provide a better long-term picture. For now, we await better signals and additional follow through to the recent burst higher. If it fails, then we could see the recent gains all erased.

Is the Fed running out of bullets? The question has been asked around Wall Street as investors watch the persistently poor economic data parade across the daily papers. From losing jobs to poor wage growth and longer “wait” times between jobs, it is hard for the consumer to believe prosperity is right around the corner. As a result of the rate cuts, both short and long-term rates are approaching lifetime lows – and the question persists: how low can they go? With normal 9-12 month lags, the cuts of the past two weeks won't be felt in the economy until 4th quarter, so much of the data being released won't be affected by these cuts. Surprisingly, our models still point to even lower rates ahead. 

 

By Paul J. Nolte CFA
http://www.hinsdaleassociates.com
mailto:pnolte@hinsdaleassociates.com

Copyright © 2008 Paul J. Nolte - All Rights Reserved.
Paul J Nolte is Director of Investments at Hinsdale Associates of Hinsdale. His qualifications include : Chartered Financial Analyst (CFA) , and a Member Investment Analyst Society of Chicago.

Disclaimer - The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable, but are opinions and do not constitute a guarantee of present or future financial market conditions.

Paul J. Nolte Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in