Tuesday Brings Another Rate Hike

Apparently the market didn’t share our thought that today would be a rather subdued day going into the rate news on Tuesday.  Instead, it was a party most of the day.  The traders liked the idea that the October lows are in and now we can have our year end rally.  Well, as most of you know, we don’t share that sentiment.  We haven’t faired too well the last few days due to the market lows being set in mid-October and since then just a lot of volatility with the last two days being up.  We did say that any rally should be sold and today was no exception.

After the bell tonight, DELL announced some sobering news on the PC front and their stock dropped about 5 % after the news.  The rest of the market didn’t like that too much either as the futures for both the SP500 and the NASDAQ 100 dropped along with DELL.  Of course, the drops are not very deep at all.  DELL must cause bulls to scratch their heads a little.  

Then there is the Fed raising rates another 25 bps on Tuesday.  We don’t know if this would cause anything by itself due to the well orchestrated expectation for the move.  What everybody is expecting is that Greenspan is going to have to turn over the wheel to someone new soon so he might as well start letting go now.  So, with the new possible chief in place in Ben Bernanke, the market can not worry about Tuesday’s rate increase but instead focus on the wonderful new world of Bernanke.  

With October now behind us, we thought is important to recap the month.  The Dow Industrials were down 128 points after the 210 points we had in the last two days.  The SP 500 is down 21 points to 1207 and the NASDAQ Comp is down about 31 to 2120.  The HUI dropped 23 points to 222 for nearly a ten percent drop-glad we’re out of that for the time being.

So, October wasn’t too bad for stocks but we have said that November may give us a tradable low point, not October.  You may not remember but the last few days of a down move are generally the strongest.  You may not remember because you haven’t seen such a thing for about two or three years and you can forget these things.  

The market is a dangerous place right now and days like Friday and Monday are just strong enough to give you the confidence to stay the course.  Just be careful.  Protect the assets you have.  

We’ve be back tomorrow for a recap of the aftermath of DELL and the aftermath of the Fed move.  The market should be tired by the end of the week and will be ready to go down into the end of the month.  Sell these beautiful prices.  The broader market has not come back as far as the Dow so you may not believe these prices are beautiful.  Just remember our analysis that shows relative performance of your stocks against the broader market.  If they are weaker than the market, please consider selling them.

Dow Industrials:   10,440.07  +37.30  (trying to get back to 10,500???)
RYVNX:    21.28
TLT:     89.78