|
Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
November 2, 2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata
Financial
Last week, earnings reports came in, by and
large, better than expected but Mr. Market continued last week’s
behavior of turning a deaf ear to it and traded lower. Volatility picked up late
in the week as Thursday’s and Friday’s market moved 2+% each day.
Action like this can be expected over the next few weeks as choppy markets
resulting from the tug of war between the bulls, who expect the last few
months of blowout gains to continue, fight the emboldened bears who now draw
conviction from the continuation of last week’s yawn to earnings beats.
Fundamentally, each side has ammunition. Bulls point to GDP growth for Q3 of
3.5%, unemployment claims easing and outsized
productivity gains for continued gains. Bears retort that the majority of GDP
growth was non-recurring (cash for clunkers …) and that, at some point,
government stimulus will have to be removed. Another battle line will be
nervous bulls (hedge funds that want to protect gains in 2009, since they
were not paid in 2008) fighting underperforming money managers who missed the
spring/summer rally. Washington-based observations were plentiful starting
with last Sunday night’s “60 minutes” expose’ on
Medicare fraud. The ease of
ripping off this government program was breathtaking as only a store-front, a
purchased list and an inept bureaucracy were required and should give food
for thought to those who look to “Medicare, single-payer” as a
solution to the health care debate. When it’s not your money, who cares? Wednesday brought International Paper’s
(IP) earnings that were helped ($525 million) by a tax credit for alternative
fuel use. It seems that paper mills can add diesel fuel to a process that
does not require it to qualify for the tax credit and, at the same time,
increase our use of fossil fuels (there’s those pesky unintended
consequences again!). Friday’s Wall Street Journal reported that a
Chinese wind-turbine company will be the sole supplier to one of the largest
wind farms in the U.S. This lost opportunity means that these (green) jobs
will now be created in China and our job market (the real problem that needs
fixing) continues to burn as the administration fiddles about health care. Conclusion:
Little net change is expected in the near term as daily market moves increase
their amplitude. As a result, trading discipline will be expanded to include
buying weakness below previously stopped out prices, continuing to keep stops
tight and moving stops up as rallies will allow. Short-term trading gains
tend to present themselves in this environment and I plan to capture them.
|