Google Boggles

The stock market tried to put on a happy face after opening down this morning. At least the Dow was able to muster a gain, to the tune of 4.22. The broader market wasn't doing so well and didn't finish all that well either. We are in the period of time that seems to show a lot of uncertainty with the market up one day and down the next. To me, this is a definite sign of a turn in the market.

The technicals that I follow are starting to turn over and the short term ones actually are showing some signs of being oversold. As you know, one of our favorite indicators is the five day average upside volume. The highs in this index tend to coincide with highs in the market. Tonight that index is at the lowest point since the first week of January when we had that big drop in the major indexes. The question now is, "Does this indicator work to show oversold conditions as well as predict short term peaks?" We don't normally look to this indicator for low points so maybe it's telling us that we are about to go down hard. That would not surprise us as the market has already turned over and is heading down. It's only a matter of weeks before we see a steep drop so maybe the 5 day upside volume indicator is getting us ready for a weak bounce in prices only to be followed by a swan dive. We will see.

GOOG is in the financial news today, making an announcement that it wants to issue 14 million more shares of stock. At the same time the Wall Street Journal said something about GOOG being a value play. Which is it??? Should GOOG be selling a "good value" or are they correct in selling out 14 million new shares? We have the opinion that GOOG is OVERVALUED contrary to what the WSJ may say. Since the article in the WSJ probably was written prior to GOOG's announcement, we think that the author may have been a little more cautious in his statements.

We also noticed an article on CNN today talking about the housing market and how prices are not going up as much as they have in the past several years. These are little things that we are trying to pay strict attention to due to our stance on the housing market being the fulcrum for the stock market.

In fact we think that this recent bond market rally, reducing mortgage rates, will not produce much in the way of additional activity in the housing market. If that truly happens, then we are going to be much more confident of our longer term forecast for much lower prices in stocks. If the stock market gets wind of some storm clouds on the horizon, there won't be much hesitation to sell especially now that the market seems to have rolled over. (The bond market was up today erasing yesterday's losses but forming a similar pattern to the stock market going up one day and down the next. )

Dow Industrials: 10,554.93 +4.22
BGEIX: 11.55 (this hurts after being over 12 in the last week)

PS Just a reminder that we are planning to be off the Blog until next Wednesday evening unless something big happens tomorrow or Tuesday. Please come back next week for more on the developing bear market...