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

Nolte Notes - Developing Street Sense

InvestorEducation / US Stock Markets May 07, 2007 - 06:35 PM GMT

By: Paul_J_Nolte

InvestorEducation Street Sense, what everyone aspires to, even after many years of paid education – an understanding of the way the world works, not the way it does inside of a textbook. Street Sense also was the first Breeders Cup juvenile to win the Kentucky Derby. Street sense is also what many investors believe they have when it comes to Wall Street, however bull markets tend to make everyone look smart.


The continued increase in stocks is flying in the face of a decidedly weakening economy. On top of a poor GDP report last week, the unemployment picture continued to show a slow hiring pattern. Over the past year, non-farm payrolls have regularly come in below the prior twelve-month average. Although still a ways away from actually declining, the trend is definitely lower – and has been for well over a year. The flipside to the economic numbers has been the huge amount of merger news – from Tribune to Dow Jones News. Everyone is combing their favorite screens to ferret out the next possible takeover candidate.

The Fed will meet this week and likely keep rates right where they are and the key is going to be what they have to say about both the economy and inflation. Given the market's belief that the economy is doing just fine (hitting a rough patch) and inflation is (or will be) coming down (housing slowdown), the commentary from the Fed could key a large market move in either direction.

We continue to be struck by the overall weakness in volume – lower volume on rising prices that has been a feature of the market for the past month. Some weakness is also beginning to show up in the number of stocks making new highs – their numbers are dwindling, from as many as 465 in early February to 450 in mid-April and under 350 on Friday (only 105 on May 1 st ). Over this same span, the Dow has been leading the way, with the broader SP500 following close behind. The smaller stocks have not participated to the same extent. Since Feb 22 nd , the Russell index of small stocks has essentially been unchanged, while the SP500 has increased by nearly 3.5%, and the Dow has jumped 4.5%.

The markets are beginning to thin out with fewer stocks driving the averages higher. While we have been shifting money toward larger stocks, the narrowing of performance is not a healthy trend for the overall averages. Put this into the category of signs of a topping market (which is getting rather full). However, though the signs point to a top, we unfortunately won't be able to pin point the actual day of the turn until after the fact – guessing when the turning point will come is dangerous to one's wealth.

The bond market seems to be laughing at all the worrying about inflation, as 30-year bond yields are exactly where they ended the year, while short rates have moved a smidgeon lower. Our bond model, save for a six-week “vacation” early in the year, has been pointing to lower rates since July of last year, when both rates were at 5.1% (now both around 4.9%).

The concerns about gas prices reaching $3.50 or higher this summer as a sign of a new round of inflation is more likely to put the brakes on consumer spending, as the rise in prices has already “cut” wages by nearly 2%. With the consumer unable to draw from home equity and overall debt levels already high – this could be a long hot summer for many!

 

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

Copyright © 2007 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.


© 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