We are coming to the end of August, and for the long players and the bulls, the end is a welcome change indeed. Depending on today’s action, it could be the worst August in 10 years. Now, let me see … That would take us back to August 2001. If I remember correctly, the market wasn’t doing all that well back then. In fact, I believe the market was in the midst of a huge decline, a sharp decline in fact. Looking at the NASDAQ chart from January 2000 to July 2002, one could only describe it as a vertical wall. The DIJA is only marginally different for the same time period. Market momentum changed quite a bit after that drop, a change that took the DIJA from 7591 to 13985 exactly five years later. I wouldn’t be surprised to see the same movement in the next five years. Just saying …
In order for that to happen, though, the big debt issues of the day need resolution and the global economy needs to pick up steam. One key to that is both the cost of doing business goes lower and the cost of driving for the consumer goes lower. This means lower oil prices. It would appear that this key is shaping up now …
The American Petroleum Institute said late Tuesday that crude inventories rose 5.1 million barrels last week while analysts had predicted a drop of 1.2 million barrels. Inventories of gasoline dropped 3.1 million barrels last week while distillates increased 276,000 barrels.
It also appears that the European economic powers are lining up all their ducks in a row. Slowly but surely, Germany is framing up a long-term resolution to the economic woes of the lesser economic countries in the Eurozone. I do believe the panic-prone market is getting this. The scaredy-cat market finally seems to understand there is no way Germany and France would let the Eurozone dissolve or the euro disappear. No, the issue has been finding a way to save the PIIGS countries without wreaking economic disaster in Germany and France. Slow but sure …
Now, me thinks the U.S. will follow the same path. The congressional “Super Committee” will follow the path best suited for the country, not the party. If so, the path toward that five-year climb will be much clearer, less debris in the way, so to speak.
Apparently, the market seems to be thinking the same, at least for the near term. Although the fear indicator gold is still dancing in the clouds, the more important fear indicator (VIX) is lightly stepping down from its recent highs. Keep in mind this is all happening amidst the dog days of August when the big money is sleeping on a beach somewhere in the world. It will wake up and return to work this fall.
Another reason for my optimistic near- and long-term view is the economic indicators coming out today, although not stellar, are better than expected. The Chicago PMI surprised everyone. It seems that Japan’s rising from the ashes is making a difference. Oh, yeh, I almost forgot. The global consumer is not dead either. The reports of its demise were premature, if you believe the retail reporting that is …
Trade in the day – Invest in your life …
