Top Line: Another day comes and goes but the volatility stays. The market seems to be scraping along the bottom and can't find a way to climb out of the cellar...that should change very soon. Thanksgiving is coming.
After we posted last night, the Asian markets managed to take the US futures down over night. But, in bullish bolt from the sky, Hewlett (HPQ) pre-announced that it expects to post better than expected earnings. That was enough to bring the futures back to positive just as the market was opening on Tuesday.
The Dow generally moved up for the first couple of hours and finally touched a 200 point rally. From there we saw the Dow drop over 350 points over the next couple of hours. Then with an hour to go, the Dow staged a major rally to take it back up to end up about 150. Volatility rules.
These are the kind of days that would normally be followed by a serious rally. The blue chips lead the market out of the doldrums and then the broader market gets in gear the next day. That theory had plenty of subscribers as the market closed Tuesday. The first fifteen minutes of the after hours trading saw a huge jump in the Q's but as we get our post up we notice that the rally has completely fizzled out.
The market is oversold and there are plenty of bargains out there. For those of you who sitting out there with cash, these prices are so great. You have obviously been smarter than the Update by waiting but at some point these prices have to start getting interesting even to you.
We think the gold mining stocks are still some of the best buys along with several other commodity related stocks. Yes, we've been recommending GDX since 30 and now it's down near 20. We still think GDX represents a great value with plenty of upside.
The fundamentals are that the government/Fed have been pumping money into the system. When this money finally gets used, inflation will be the result. While we have been proponents of deflation in the past year, the powers that be have thrown caution to the wind and have done what they can to reflate the world.
This Reflation is their answer to the biggest Credit Crisis the world has ever seen. No, it's not going to work ultimately but for the short run we see it creating some inflation in order to prevent home prices from dropping...that way people will Feel better even though their home value is still declining, the price isn't.