Top Line: Another huge down day on Thursday in anticipation of a difficult jobs' report due out on Friday morning. We think the worst is behind us with the lows having been set in October.
Here we are on Thursday evening and the market appears to be looking down into the abyss once again. CSCO's earnings gave the market a poor start but it just got worse over the course of the day. The central bankers in Europe decided to drop interest rates today but that sure didn't help the markets very much. The car makers were in Washington with their cups in hand for money, please. Then, after hours Disney (DIS) said less people came through their gates in the last few months.
Fear has been elevated again as the market has gone down the last two days. The volatility index jumped the last two days as the Dow dropped nearly a thousand points. This is setting up to be a bullish conclusion due to the heights of these indexes.
So many bears, especially in the public, can only mean one thing...higher prices. All of these newly declared bears will be proven wrong and will lose money in the process. The volatility index will come down and they will all turn back into bulls...then we'll turn bearish again.
Until then we will try to navigate through these Cheap stock prices. Jim Cramer inspired the Update to set up our own index, the FSI, the Fo(u)r Speculation Index. He proclaimed the Four Horseman to continue to push the market up...that was about a year ago. The four horsemen are AAPL, AMZN, GOOG, RIMM.
We said, he's wrong and they would lead the market down. We watched the FSI go from our initial point of 100 on October 22, 2007, down to 49.90 on October 27, 2008. (Yes, it went up to 111 on November 6, 2007, GOOG was 741, now it's 331) What's our point, you might ask???
Today, Mr. Cramer has declared that Coal is Over (at the same time he said it was ok to buy Peabody). Guess what the Update thinks. Right, we think he's wrong again, even though we do like the Peabody play so much that we bought some today. We like the symbol, BTU, great isn't it? We think coal is a good idea since it's not a popular play. We like to play this with KOL which dipped into the 15's today. Oh, yeah, BTU traded down about 15% today to 28ish. Yes, there are many great bargains in the market. (We're starting to sound like Cramer. Scary.)
The stock market is seriously oversold generally and particularly after a two day drubbing of nearly 1000 points in the Dow. We see the bad news being dangled out there and notice that the Dow is sitting right at 8700, nearly a 1000 points above the October 10th lows. Why is this? Why isn't it trading down in the 6000's? Because it's Done going down.
We entered a comment around noon on Thursday and discussed the 61.8% Fibonacci retracement level that would make sense if we were truly going up rather than starting a new down trend. The numbers we presented were 8730 in the Dow and 1235 in the NDX. The Dow did break down a little from 8730 but the NDX stopped going down at 1235 .85. Do we Know that these are the lows for the next few months? No, but it's a pretty good thought at the moment.
As we have been writing this evening, the world markets are coming back from the edge. When Japan opened, the Nikkei opened down over 600 points or about 7% but has climbed back and is only down about 100. Don't forget, even when it was down 600, the Nikkei was up nearly 20% from it's lows two weeks ago, yeah some bear market. Plus, the SP500 futures are now up about 15.
We think the anticipation of such bad news tomorrow morning (yes, the jobs' report) has blurred the reality of the market. Even if the number is bad, the market has Already sold off for that. If we get any selloff at all after the report, and even if we don't, Buy...