The CBOE Volatility Index or VIX has moved down recently from reaching a high of 57 on January 20th of this year to a more sombre 42 which is still at a historically high level but it seems that investors are taking in all the negative news quite calmly. This is a welcome relief for stock investors at least for the moment. It seems that investors are placing heavy expectations on the hope that the stimulus package will get the sluggish US economy moving again. However, things won’t change overnight and many notable analysts have forecast that the current recession will last into 2010 (making it a depression) and only in 2010 will there be some sort of recovery. So definitely the medium term signal for the stockmarket is still down.
Please take a look at the VantagePoint 3 month chart below of Dow Jones Industrial Average Index:
The Predicted Neural Index (green line) is at 1 (bullish); the Predicted Long Term Difference line is trending upwards (bullish) but negative (bearish); the Predicted Short Term Difference line also seems to be edging upwards (bullish) and is just above 0 (neutral); the Predicted Stochastic is at 28.67 which is above its low threshold of 20 and is above its trigger of 23.3 (bullish); the Predicted MACD is at -166 which is below its threshold of 0 (bearish) and is well below its trigger of -113 (bearish); the Predicted RSI is at 30.44 which is just above its low threshold of 30. Thus there is a mix of bullish and bearish signals but with the Predicted Stochastic and Predicted RSI close to their lower thresholds, there is a greater probability of a move up for the very short term i.e. for a few days.
Some recent market news:
- On Monday alone, tens of thousands of employees were laid off as announced by companies including Pfizer Inc., Caterpillar Inc. and Home Depot Inc. The economy lost 2.6 million jobs in 2008, the most since 1945. Economists predict another 2 million or more jobs will vanish this year.
- The Fed is thinking of other ways to bolster the economy (apart from slashing rates which it cannot really do any more since the new target band for its key rate is between 0 and 0.25%) such as: boosting the availability of consumer loans by the Fed buying securities backed by different types of consumer debt (such as student, auto, credit card, and small business loans); buying long term Treasury securities; continue to buy up mounds of corporate short term debt or commercial paper; continue making cash loans to banks and bolster the mutual funds and investment firms; and continue to buy up Fannie and Freddie debt.
- Oil prices rose slightly on Wednesday in the hope that the stimulus package will help bolster the sagging economy.
- Sun Microsystems Inc. has announced a loss of $209 million in the latest quarter, dragged down by a big charge for layoffs and falling demand for servers and data-storage machines.
- Yahoo posted a $303 million loss in the fourth quarter, which surpassed analyst estimates after factoring out about $600 million in charges to account for 1,500 recent layoffs, office closures and the eroding value of Yahoo’s European operations.
- Steel producers, U.S. Steel and AK Steel said on Tuesday they expect operating losses in the first three months of 2009, while a third steel company, Nucor Corp., forecast “only marginally better” earnings compared with its fourth quarter. The forecasts came in earnings reports shows a reversal of fortune for an industry that until recently made record profits riding on the commodities boom.