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Dallas, TX
April 30, 2008, 08:00 EST |
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Dr. Joe Duarte's Market I.Q. |
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The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors
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Main Street Worries Hit New Highs
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What's Hot Today: |
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Global stock markets were subdued for the second day running as traders await
the Fed's decision on interest rates and the future of rates for the near
future. Also important is the fact that today is the last day of the month,
which is the beginning of the seasonally bullish end of the month/start of a new
month trading period.
Lots of data with market moving potential will be released today, tomorrow, and Friday, which is the release of the employment report.
Watch for our employment report preview tomorrow.
Today's Economic Calendar:
- 7:00a.m. MBA Mortgage Refinancing Index. Previous: -20.2%.
- 8:15a.m. ADP/Macroeconomic Advisors Private Payrolls Forecast. Expected: -85K. Previous: +8K.
- 8:30a.m. 1Q Advance GDP. Expected: +0.5%. Previous: +0.6%.
- 8:30a.m. 1Q Employment Cost Index. Previous: +0.8%.
- 9:45a.m. Apr Chicago PMI. Expected: 47.5. Previous: 48.2.
- 10:30a.m. Oil Supply Data.
- 2:15p.m. FOMC Rate Cut Decision. Previous: 2.25.
- Sources: The Wall Street Journal and Marketwatch.com.
News For Thought
Decline in home prices accelerates. Data from the "Standard & Poor's/Case-Shiller index that measures home prices in 20 major metro areas dropped 12.7% in February from a year earlier -- the sharpest decline in the data's two-decade history," repored the Wall Street Journal.
Consumer confidence hits new low. According to Marketwatch.com: "The April consumer confidence index declined to 62.3 from a March reading that was revised up to 65.9. Consumer confidence is at its lowest since March 2003.
Obama blasted Pastor Reverend Wright. Finally answering critics for what some called a tepid response, Senator Obama finally seemed to break with the reverend altogether, noting that the pastor's latest comments "offend me, they rightly offend all Americans, and they should be denounced."
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Gloom And Doom: Main Street, Wall Street And Points In Beetween Worries Hit New Highs
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Wall Street's "Great Depression" Says Hedge Fund Manager
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Three segments of the population are worried. Some Wall Streeters are calling the current situation a "Great Depression." Main Street is nearing despair, according to the latest consumer confidence data. And millionaires surveyed by Fidelity are all shook up about the current stock market and cautiously hoping for better times ahead. This is precisely the kind of news that makes contrarians smile and enlarge their stock shopping lists.
According to Reuters Wall Street is in a "funk," with one hedge fund manager describing the current situation a "Great Depression." The wire service reported: '"It is the Great Depression on Wall Street. It sure isn't on Main Street," Ken Griffin, chief executive of hedge fund Citadel Investment Group LLC, said during a panel at the Milken Institute Global Conference in Beverly Hills, California," adding "According to Griffin and other top U.S. investors at the conference, the credit and housing crises that led to hundreds of billions of dollars in losses for Wall Street firms will take those investment banks years to claw back from."
Meanwhile, consumer confidence has dropped to levels not seen since Hurricane Katrina, while according to a Fidelity Investments survey of wealthy investors, this group's views of the markets "is at an all-time low," according to Marketwatch.com.
According to the Fidelity survey, as featured by Marketwatch columnist Thomas Kostigen, millionaires are using the current time as a "cautious" buying opportunity.
Yet, despite the fact that Fidelity's millionaires "expect a rebound in the economy -- particularly in real estate and the stock market -- beginning next January," their enthusiasm is not backed by their investment plans as 'one-third of millionaires (31%) plan to add more assets to fixed-income vehicles during the next 12 months, while 27% plan to increase their exposure to individual stocks and 14% to real estate," according to Fidelity.'
The fact that the majority of Fidelity's millionaire investors is looking to invest in bonds, and less than a third is looking to add to their stock holdings is hardly an endorsement of a long lasting bull market, which is why it's an encouraging sign, especially when placed in the context of falling consumer confidence.
Still, looking further into Kostigen's article, we note that among the biggest fears from the millionaires is that of rising taxes in the future noting 'The majority of millionaires see a likely or "very likely" chance of significant increases in the federal income tax, capital gains tax and dividend tax rates within the next five years. Of those expecting higher taxes, most say the increased payout will influence their investment strategy.'
And even more bullish from a contrarian standpoint is the fact that those with $10 million or more are more pessimistic about the future 'according to Fidelity "perhaps because they have more to lose" than millionaires lower down the money chain.'
Finally, this is interesting "Politics too, comes into play. Republican millionaires are less pessimistic about the current state of the economy (-41) and more optimistic about the future (+29) than democrats are, at (-59) and (+5), respectively, the survey shows. "
Conclusion
Gloom and doom is reaching its zenith as Main Street, Wall Street, and the millionaires in between are all very worried about the present.
Yet, the stock market seems to have bottomed, and barring a wrong way move from the Fed, or some external event, should resume its rally in the near future.
The devil, of course, is in the details. And that means that the S & P 500 needs to deliver a convincing close above 1400 at some point, sooner, rather than later.
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Technical Summary: |
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Chart Courtesy of StockCharts.com
S & P Remains Below 1400
The S & P 500 and the Nasdaq Composite moved in slightly different directions on 4-29, as the former moved lower and the latter moved higher.
The key in the short term is what the Fed says and does on 4-29.
Still as more time passes, if there is no major break in prices, the chances of an upward break out and an extension are likely to rise.
That could still change, though, especially in a jittery market such as this one. For now, though, we are looking to add positions to our growth stock list. We have added one new position. See below.
Our S & P timing model is still on the long side and we still have several open positions in our growth stock list.
Chart Courtesy of StockCharts.com
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Market Moves - Stock Of The Day
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Goldman Sachs' (NYSE: GS) Quiet Rebound
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Some hedge fund managers are worried about a "Great Depression" on Wall Street but Goldman Sachs (NYSE: GS) shares seem to be saying something else.
Chart Courtesy of StockCharts.com
In fact, Goldman shares have fought their way back to their 200-day moving average. And if the Fed says and does the right things this afternoon, the stock could cross the key resistance level and possibly move higher soon thereafter.
If this scenario develops positively, it could signal that money is moving back into financial stocks with strong balance sheets and little exposure to subprime mortgage debt.
Goldman has come a long way, some 35% from its March intraday bottom. But two things are on its side.
One, the market's overall trend has improved. And two, the Federal Reserve is not looking to derail the market's rally. Rather the Fed is looking for balance, which means that it will likely try to let the market down easy if indeed it decides to stop lowering interest rates in the near future. |
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