Posted on 08/02/2010 1:28:58 PM PDT by SeekAndFind
A jagged July ends positive, and two battered bulls feel vindicated.
First, a proprietary word: The Hulbert Stock Newsletter Sentiment Index (HSNSI) -- which the reflects the average equity exposure among a subset of the short-term market timing newsletters tracked by the Hulbert Financial Digest -- stood on Friday night at 35%, down from 47.5% on Thursday.
Earlier this month, Mark Hulbert argued that the HSNSI's relative slow response to the market rebound off its July 2 low was bullish from a contrary point of view.
Stocks are indeed slightly higher now, but so is the HSNSI. Mark Hulbert regards the current reading as sliding back from positive toward neutral -- over the next few months.
In contrast, recently I looked at two bullish letters that were being battered by July's cross currents. Both have updated as the month ended strongly -- and both feel vindicated.
Sound Advice has distinguished itself by heroically turning bullish in very early 2009 and remaining bullish through every local difficulty since then. But this summer's slump left it queasy, though still buying. ( See July 19 column.)
On Friday, Sound Advice seemed well recovered, although its reasoning was still rather grim: It thinks the economy might well be headed into a double dip -- but that might not be the end of the world, or at least of the bull market.
(Excerpt) Read more at marketwatch.com ...
"We took a look at GDP numbers for the period since World War II and found that though most expansions begin and continue unabated (1949, 1953, 1957, 1974 and 1990), at least four (1969, 1980, 1981 and 2001) revealed not just slowing after the first quarter of growth but a renewed contraction before gaining enough traction to post successive positive quarters. And in two of those recoveries (1974 and 1990) that did not endure a contraction after the recessionary quarters had ceased, growth decelerated, as it has in this quarter, before the economy took off."
Sound Advice's contrarian conclusion: "Skepticism about the economic recovery continues, and substantial anxiety about the durability of a recovery for stock prices also lives on. With few exceptions, this combination of anxiety usually points to higher prices. If our heretical review of how economic expansions have worked over the last 65 years is confirmed this time around, we should do well."
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Cabot Market Letter said in early July that it was "putting a line back in the water." It nearly got washed off the quay. ( See July 22 column.) But it's still there.
Its most recent monthly issue, dated July 28, was headed "The Future Is Bright." That's refreshing, eh?
Cabot wrote: "Long-time readers know the best investing environments come when markets strengthen, yet investor sentiment remains negative, and that may describe the current situation to a T. According to the American Association of Individual Investors, investor sentiment was recently at its lowest level since 1987, when its record-keeping began. Yet the market is strengthening! Our [intermediate term] Cabot Tides buy signal remains in effect, and our longer-term Cabot Trend Lines could turn positive at the end of the week."
Cabot is now 65% invested and has added two new buys: Riverbed Technology Inc. /quotes/comstock/15*!rvbd/quotes/nls/rvbd (RVBD 37.64, +0.55, +1.48%) and Salesforce.com Inc. /quotes/comstock/13*!crm/quotes/nls/crm (CRM 101.91, +2.96, +2.99%) Cabot concludes with a surprisingly strong (for such a judicious service) endorsement of the venerable "Presidential Election Cycle" theory. It writes: "From the market's low point in the year of the midterm elections (like 2010), to its high the following year (2011), the major averages have averaged a gain of nearly 50%. It's true!"
Brimelow Concludes :
“Based on past performance, it projects: “With a Dow low of 9,687, a rally into 2011 could carry the index well above 13,000 and even to 14,000. It might sound crazy, but history suggests it’s not just possible, but likely!”
Who gives a damn about the Dow’s numbers when the debt-ridden government is controlling every aspect of the economy?
Hell, the Dow could go to 100,000...it means nothing if there is no real wealth, or that the companies and banks are part of Hussein’s regime.
I wouldn’t be surprised if it’s up quite a bit next year. Inflation and interest rates are low. Consumer spending is average. GDP is lowish, but in the typical range. Mortgage delinquincies are way up, but that’s to be expected post-bubble.
No, the whole picture ain’t rosy, but it’s not all doom and gloom, either.
Sure would like to see a recognizable bottom formation before I launch to the moon. Shoosh.
Enjoy the party now. By year-end the “wealthy” will be selling off to avoid obama’s tax increases.
Throw all post-war history out the window - he have a socialist in the White House again.
I tend to agree. However, my reasoning is that hyperinflation will not make the dow worth more. It will simply make the dollars in which is is measured worth far less.
I’m reminded of those videos from 2006 where all the financial advisors were saying housing was only going up after a tiny breathing spell. Only Schiff said it was the bubble bursting. And what did he get for it? The other financial “personalities” laughing out loud at him ON THE AIR!
But he was right.
I am not concerned about these folks predictions on the market.
Oh Boy! I am gonna rush out and buy some mutual funds right away! Happy Days!
You obviously know very little about the markets. We are in a sucker rally right now, and the Dow has not followed the overall trends that the economy is taking.
The problem with 2011 is the Bush tax cuts expiring, revising the Clinton increases (The largest in our history) becomes retroactive. Capital gains will rise to over 30%, all marginal rates will increase by over 10%, and Corporate taxes will nearly double.
Add to that, the current operating budget that has increased by nearly 100%, Shortfall spending by Congress in addition to out of control budget spending and it all adds up to utter economic disaster.
Investors are taking advantage of the last few months of free unaccountable capitalism they have left before everything comes crashing down. Just the planned 1099 laws recently passed for all gains or sales more than $600, will prove to be one of the major factors in killing the entrepreneurial spirit.
Our ONLY hope is to stop this in November. If we cannot or do not, the term “Doom and Gloom” will be putting it quite lightly.
More like 4,000
marking this to come back and review in 6-8 months!
Bwahahahaahaha!!!!!!
Yea! OK!
[snicker]
Whatever you say, Mr. Buffett.
The market is so manipulated anymore that I no longer trust it with my money. It has become nothing but a pump and dump garbage can for RAT bankers and people like Soros. The small investor is gone and won’t be back for years.
I often wonder how the DOW can return to such numbers so quickly.
If it hits 14000, that is not far off from the highs before the crash. Where is the value? US Real estate is in the toilet, massive layoffs. Yes GDP is up, but from what? Last year? Many companies are only showing profits from the massive layoffs, or playing (gaming) the market.
I really don’t see how this can be sustained, without some suckers loosing big time when it all comes crashing down again.
History shows? Obviously the author knows nothing of history.
There is a new game afloat, and even though the stock market seems to be independent of it, caution is advised. The lunatics still have big plans for the asylum.
And market volumes is less than a third of what it was in 2007 when it hit 14,000, and won’t likely reach that volume ever again, because the new financial “reform” laws will prevent the market from advancing rapidly. (At least under this administration.)
By the way, notice anything different between 1986-1998 and now? Can you even compare the two with a straight face?
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