Wednesday, October 14, 2009

Dow 10,000, Let's Party???

Top Line: More of the same...the earnings for INTC and JPM were greeted with a big lift to the market. The Dow crossed back into 10K land and some would like to see that be the start of something big.

Everyone is excited about the Dow 10,000 event. March 1999 seems like a long time ago but that was the First time the Dow crossed 10K. That time, there were Dow 10K caps for all the traders on Wall Street. Were there caps today or just dunce hats? We don't know but the fanfare had to be much more subdued than 10 years ago.

Still, the media wants you to believe the fantasy that now is a good time to believe the worst is behind us. We are wondering where these news stories were in March when the worst truly was behind us, for the time being. Now, after a 50% move, they expect that you are OK to get back into the market.

Whatever you may think, after no gain for 10 years, there should be no celebration...but people who own stocks for the long term are eternal optimists. We call it the Lost Decade and we expect another Lost Decade to come. OK, enough.

As far as the real action today, stocks were up on the back of JPM and INTC earnings. The earnings were somewhat better than expected and that seemed to be the catalyst for the market's move up...expectations that most earnings reports will show good news. At some point the market will stop partying and move against those complacent stock holders or fresh new buyers. In the mean time, we hope they are very careful.

We are not going to say that we have called this market right over the past few months but we also don't think there can be much more upside based on the money that's been used to get us where we are.

Realism does cross our minds on occasion and this should be one of those times. We do not think the market can continue going up but it is. The right thing for the Update to do is to continue to wait for a point to get back in if that is truly the right thing. We won't know that until it actually happens.

We have considered our position that GDX would go to 55 and gold would go to $1100 but we seriously think there should be more than that. GDX has struggled to keep up with the move in gold and our position is that is not bullish for GDX or gold. We expect both should be sold right here and now. If we get a chance to buy GDX back we will certainly take a hard look at doing so. That would be around 40 and maybe even lower. However, even if that happens we would make sure that it was the right thing to do.

For now, the stock market is not safe due to GDX not leading anymore. We will continue to watch the miners to see if they can tell us anything else. As we have said, gold could go to $1100 but that's not all that far away. One of the Fed officials said that he didn't think the Fed would change their powerful accommodating policy until employment improved so gold got a little pop from that but we are quickly coming to a reversal in both the dollar and gold, of course in the opposite direction. Be careful.

What we are looking for in the stock market is a turn. What we have been getting for a couple of months is modest pullbacks with higher highs after them. This creates a safe environment for traders and gives stock owns comfort because they now don't have to sell. They sleep better due to all the little comeback rallies that have happened over the past three months. In order for them to take note, their stocks need to roll over pretty hard. When that happens, sellers will come back, probably in panic, as usual.

While it's easy, or seems so, to be bullish now, it will not be as easy when stocks are going back down.


Anonymous said...

There was a cap yesterday and it doesn't look like a dunce hat...Dow 10,000 Again!

Here's a link:


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