Friends
“At the end of every hard earned day people find some reason to believe.”
Recently, I had a request to include some more song titles and lyrics into the daily updates, and I thought what a better time than today, at the end of the third week of market mayhem (yes, the wear and tear is starting to show). Yes, we had another wild ride for stocks today, as an early 100 point Dow gain deteriorated into a sizable loss by the afternoon. Stocks drifted downward in the final hour to close the day down 172 points on the Dow Jones Industrial Average and down 17 points on the S&P 500. Traders continue to try to price in the anticipated “recession”, not to mention the continuing mess in Europe.
The takeaway from this week is that on a technical basis, stocks have a lot of rebuilding to do and many lower levels to test. 1101 on the S&P 500 is a level that we are looking to test as soon as next week. If we can put in a short-term bottom slightly higher than that it would be encouraging. On the other hand, if we test 1101 and it does not hold, we will be looking at 1070 and possibly 1050 as major support levels that traders will be watching. Gold continues its march to $2000, finishing the day near $1851. Oil completed its 10% round trip this week ending the session near $82 per barrel.
As we get closer to these technical support levels, value continues to get more intriguing as prices on many stocks are at levels we have not seen for quite some time. As we know, value is not a catalyst to higher prices, but it provides perspective as to where things are trading relevant to future expectations.
As we finish this third week of amazing volatility and falling stock prices, we ask ourselves – is there any leadership at all in Washington or Europe? Is there anyone who can instill confidence in free market capitalism? Can anyone unleash the incredible amount of pent-up animal spirits that reside in the American people? With so much money on corporate balance sheets and in money market and bank accounts, not to mention treasury securities (the 5-year treasury note yielding .90%), what will it take to unleash the buying power that trillions of dollars represents? As difficult as it looks right now, we will find the answers. The question is how much damage will be done before we do. Look for policy responses in the coming weeks from the Fed and the White house. Oh boy.
As Mr. Springsteen says…”at the end of every hard earned day people find some reason to believe.”
Have a nice weekend everyone. Try to stay cool.
