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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
September 28,
2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata
Financial
Last week, the dollar continued to dictate the
market’s movement early on. Monday reinstated its lost moniker of
“Merger Monday” with Dell’s purchase of Perot Systems for
almost $4 billion in cash. Despite this excitement, the dollar’s
strength led to a down day. Tuesday’s reversal in the dollar resulted
in the only positive day for the market averages all week as gold bumped up
against all-time highs. Wednesday’s early market followed
Tuesday’s lead slightly higher, despite the knowledge that the Fed’s
statement of policy would be announced later in the day. As the clock struck
2:15pm, the Fed’s statement was released with no discernable
differences in policy to relay. The dollar continued to weaken (as Bernanke
implied we’ll continue to keep money loose until we see the whites of
their eyes) and the market rallied to new highs. After a few minutes passed,
the dollar started to reverse, leading to market averages giving up some of
these gains. Throwing gasoline on this smoldering market action was
CNBC’s interview with VISA’s head, who told us that the last
three months were flat, not getting better as the cheerleaders in government
would have us believe. By the end of the day, market averages closed lower
than the previous day’s close on heavy volume after making new highs
intra-day, a chart pattern known as a technical reversal. Its relevance is to
alert us to potential weakness in the market short-term and Thursday and
Friday’s markets obliged with losses both days. This does not signal
the end of the world – only that the likelihood of a full-fledged
correction is now significantly higher. On the plus side, liquidity continued
to improve as the expression ‘IPO’ made its way back into the
market’s lexicon with more than a few companies offering initial shares
to the public. Thursday’s housing report brought mixed news as home
sales increased, but closer inspection showed improvement in the under $250k
market, with the +250k housing market still in the doldrums. Previous comments
here have pointed to the potential goosing of demand by the Feds with their
$8,000 first-time buyer tax credit and this week a survey of these buyers
revealed that more than half of them would not have purchased their house
without it. The housing industry is lobbying hard to renew and/or increase this
tax credit and it will be interesting to see if the current policy of weaning
us off government help extends to this program. Stay tuned as the current
program is slated to expire at the end of November. In the “let’s
create jobs by having one person dig a hole and another person fill it
in” department, a Wall Street Journal story reported that since 1964,
Ford has been avoiding tariffs on “light trucks” built in Europe
to be imported into the U.S. by disassembling portions of them in Europe after
they have been built to change their designation (to reduce the tariff),
shipping the parts separately from the newly labeled truck, and then
reassembling them once they get here. Gives you a warm feeling about
government policies, doesn’t it? Conclusion: The market’s technical
reversal must be respected in light of the (mostly) uninterrupted run up of
the previous six months. New leadership tends to evolve after corrections and
a shift from small, lower-quality companies to larger, stronger ones (the
type I focus on) normally results. No change in strategy is planned as it
provides the best mix of protection and participation in all potential
scenarios.
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