Friends
Bad news just overwhelmed the stock market on Tuesday, as the dust up in Korea combined with continuing European debt worries made up the problematic macro picture. On the domestic level, the continuing FBI probe into insider trading at many of the larger hedge funds and mutual funds has damaged the psyche of traders as they wait for the next shoe to drop. Add to this, the Fed minutes displaying the lack of unity among Federal Reserve members and you have the recipe for a down market.
The S&P 500 tested the 1180 support level all afternoon and closed right at that level. It will be important for stocks to hold in this major support area (1178 -1180) for the next few days. If this level can’t hold then a trip back toward 1150 may be in the cards. If we can hold them here in this area we may be able to set up for a year-end assault on the highs for the year. The Dow Jones Industrial Average fought to remain above 11,000 closing at 11,036 down 142 points for the day. As bad as the day looked, the late technical action did provide a little encouragement.
We have been discussing the continuing battle between the uncertain macro-economic picture and the surprisingly strong condition of US Corporations. After the close yesterday, we got yet another strong report, this time from Hewlett Packard. The tug-of-war between the good and bad news has given us the volatility that we’ve experienced this year in the markets. It seems that when we aren’t focused on the very stellar corporate earnings, our attention is diverted by the increasingly disturbing macro picture. We seem to rally into each earnings season, only to fall back as we focus attention elsewhere. Add in a little scandal action, like insider trading, and most investors just get overwhelmed.
Our job, here at CHJ, is to cut through all the noise and uncertainty to find the best opportunities available for our clients. Will the Korean affair have an effect on US Corporations’ earnings? Will the holiday spending season be affected by the insider trading probe on Wall Street? Most importantly, will the Feds QE2 have the desired effect of moving money through the system thereby heading off deflation and indeed, creating some inflation? We have to look beyond the distractions and make sound investment decision for you, determining the difference between an opportunity and long-term problems.
With the holiday season upon us, we want to wish each of you a Happy Thanksgiving. Here at CHJ, we are most thankful that you have joined our family, and we look forward to many holiday seasons together for a long time to come.
