We are in the middle, on the fence, in no-man’s land. The market has no catalyst to move forward after a week of moving forward and it has no particular reason to fold, even if the Syria issue is not resolved, QE tapering is still hanging out there, and …
- House Republican leaders yesterday postponed a vote that would have approved the financing of the government through December. The delay came because of opposition among conservative Republicans to parts of the legislation related to the funding of Obamacare, which they want to strip out. The government faces a shutdown if legislation isn’t approved by September 30.
Soon enough, the clamor about the House shutting down the government will begin. When it does, we will see if the market is focused on the future or the fear. The bellicose dodo-heads in Congress will scream and shout about killing the Affordable Health Care Act. They will scream the US debt is killing America. They will threaten not to extend the debt ceiling, thus shutting down the US government. Will they do it? Probably not, but the market might see the affected sound and fury as a reason to sell. If they do, and a sell-off occurs, view it as a major dip and then buy.
Don’t pay attention to the man behind the curtain, just buy.
- We have an appointment below 1,600 on the S&P but above 1,500 before the correction is over.
We will hear the above, or something similar, in spades as the breathless media’s bombardment of news about the upcoming debt-ceiling debate begins, or if the US attacks Syria, or when the Fed meets next week. Don’t worry about it, as the economic fundamentals are far more important to heed. As well, don’t fret about data coming out of Europe, at least not yet.
- Eurozone industrial production returned to contraction in July, tumbling to -1.5% on month from +0.6% in June and missing consensus of +0.1%.
The market needs more time to assess Europe’s economic position. The numbers in the US and China did the spring swoon thing and then waylaid through the summer, but have since rebounded. It is likely Europe will do the same.
Just keep in mind where the market is and where it can go if autumn turns out to be like the previous four autumns for the market. Speaking of where the market is …
- The so-called worst month of the year for stocks has, so far, been a pleasant surprise, with the S&P 500 getting back within 1.5% of its record high set six weeks ago.
And, speaking of where it might go …
- If we continue to trade at 15.2 times next year’s estimate, with no earnings multiple expansion, you’re looking at 1,850 on the S&P 500.
Anything can and will happen in the market, but always there is an underlying truth based on what the market believes about making money. Sometimes, that truth is negative and scary, as it was in 2008, but other times, it is positive, as it is today. Unless and until that underlying truth changes, the market will go forward, choppy and sloppy, but forward.
A final thought today for those of you who do not use software to trade and for those of you who think technical analysis is too difficult.
- Technical analysis is an arcane science that was once so esoteric that it seemed only the mathematic gurus and quant jocks at proprietary hedge funds and money management firms possessed the knowledge and tools with which to gain a trading edge. However, with the proliferation of so many different charting software packages over the past decade, the “secret society” mystique of it has been debunked to the extent that even the average retail investor can apply it to his investment discipline.
Ultimately, I am a fundamentalist, but I do rely on technical analysis to a degree, and I only do that because of my trading software – VantagePoint. Talk about making it simple …
Trade in the day; Invest in your life …
