The Fight at the Bottom: S&P 800

There is a real tug of war going on right now: the battle for the market bottom.  Much prevailing wisdom saying there is a lot of support for the S&P 500 at around the 800 mark.

The market is cris-crossing back and forth over it right now.  If we can stay above that at the close, it may be a bear market rally of 10-15%.  If it closes or dives below, we may retest the market lows of November before the turn.

When will all this uncertainty end?  Answer: no time soon.

In the 1970s when we went off the gold standard and inflation ate away at purchasing power, the typical American household became a 2 wage earner reality to pay the bills.  In the 80s and 90s, our savings rate went to zero as we spent more and more of our available income to keep up our standard of living.  In this century, we have moved to deficit financing to keep the party going.

What is left?  How is the American consumer, 70+% of our economy and 40+% of the world economy going to “get things going again”?

Answer: no time soon.  Prepare for, in the words of our new President, a “lost decade” my friends.

To show you where my head is at, the most recent additions to the clutter on my desk are 2 boxes of shotgun shells and the 10 oz of Platinum that I bought back in Dec (finally delivered … now worth 35% more than I paid for them).

Like Hunter S Thompson once said, “When the going gets weird, the weird turn pro.”

Later…

S&P 500? Will The Market Continue Down?

I wanna keep this light but … it’s kinda tough when there is so much non-growth oriented (see, I avoided saying ‘negative’) news on the economy.

I have been looking for a bounce in the stock market, maybe back to 1000-1050 in the S&P500 index.  It is looking like a tough fight as the overall trend in the market is down.  One of THE most important things you can learn as an investor is (memorize this):

YOU MAKE MONEY IN THE STOCK MARKET BY INVESTING WITH THE DOMINANT TREND IF YOU INVEST AGAINST THE TREND YOU WILL LOSE MONEY.

The we are in mess started with real estate and real estate has to start a recovery for us to be heading back to an even playing field.  And real estate market is not coming back anytime soon.  I know a lot of Realtors (I am a Broker myself).  Most of them are good people.  They made good money in the boom.  Nearly every one is hurting now.  A good number of them think properity is just around the corner….NOT!

Thank you Mr. Hoover but, I don’t think so.  Futures are looking like late 2010, maybe even 2011 before that happens.  Sometime preceding that is when the stock market will have truly bottomed and a new bull will begin.

The S&P500 COULD really get to 500 before all is said and done.

Look out below.

Commodities Today

I just read a great blog entry at Moolanomy about commodities.  Commodities have been creamed liked everything else in this latest stock market cliff jumping exercise and everyone should have a) some education about what they are b) a bit of them in their investment portfolio.

As you no doubt know by reading my blog, I am partial to precious metals which are a different sort of a bird when it comes to the more basic commodities such as oil, wheat, lead, etc. due to their significant inherent value (in small quantities). Read more

Early 2009 Stock Market Prediction

For most of December the stock market has not done much - drifting around in a specific range on the Dow and S&P indexes on low volume. After the nightmarish volatility of October and November, things have calmed down with the volatility in the market actually shrinking. The S&P 500 - the index I pay the most attention to - has been trading in a range of 918-850 for the past three weeks. The next big move in the S&P 500 (e.g., 100 points or more) will begin once the S&P 500 breaks out of this range.

If the S&P 500 were to close below 850 I would expect to see a quick move down to the November lows (around 740), putting in a double bottom (technical traders consider this to be a good thing, essentially a test of the previous low and recovering without go significantly lower). However, if the S&P 500 breaks out of its 918 short-term resistance point I’d expect the S&P 500 to rally up into the 1000-1050 level by mid-February at the latest and then top out to have another correction that would take the market at least down to its November low.

The real take away point here is that IT IS QUITE LIKELY THE MARKET WILL RETEST THE LOWS OF NOVEMBER. This will happen sooner if the lower end support on the S&P is broken at 850 in the next couple of weeks or later into the first few months of ‘09 if we quickly move up through the 918 resistance point (more likely the latter in my opinion).

You need to be nimble and understand market trends to make money these days. The market action in the next couple months will be a great way to see how the Buy and Hold strategy of “yesteryear” is flawed and will get you nowhere in your portfolio. If the market turns up soon, I wont be buying much and will wait to short it on it’s return to the November lows. At that point, we should see the beginning of a nice bull market that will be with us for quite awhile.

This is the last trading day of 2008. If you have gains (Yes! Somewhere, someone … has gains) you may want to get out of some of your losing positions to offset the tax hit on your profits.

The market will be fun to watch over for the next 4-6 weeks…hang in there.

Financial Literacy for Kids

Anyone that has read much of this blog knows that I am on the warpath about the overall fiscal irresponsibility demonstrated by the United Socialist States of America (used to be USA).  From the damn-the deficit-and-print trillions Federal Reserve to the cash-out-refi-something-for-nothing home owners (interesting and rather inaccurate term … “home owner” … in this case dont you think?), few people seem to grasp the depth of financial crap we have plopped ourselves into.

So, let’s talk about part of the solution:  getting people smarter now about how to actually save, invest and earn.  That is one my broader purposes with this blog (and my other blog at Your Inner Expert) but also in my life right now…I’m here to help (uh oh … I sound like Henry Paulson).  Some of you can still change your bad habits (some are beyond hope but you are likely not reading this anyway).  Anyone can benefit from the following resources but the are targeted toward the best place to start and that is: WHILE YOU ARE YOUNG. Read more

Market Perspective 12-12-08

It appears that the stock market is basing for a nice upturn.  If we bounce off of the current downtrendline at about 855 on the S&P500, we should see a nice rally into 2009, maybe even up to the 200 day moving average … something we are a ways away from now.

After that, it could be a retest of the lows we saw in November.  The economy is just now getting into the full throws of the recession that is upon us and it is not going away anytime soon.  Continuing to print money and throwing it at any problem that comes along is going to start to come back to haunt us as well.

I see that the automaker (auto-faker?) bailout died in the Senate.  Must not have been enough pork in there Read more

Buying Gold and Silver

I found a great new resource for getting the latest and greatest street prices for gold and silver.  It has been the case that the spot price of precious metals has been collapsing like everything else.  This is in due in part to the massive deleveraging of hedge funds who are selling anything they have of value to meet their margin calls as investors redeem their accounts and want to go to cash.  Since these are paper contracts to buy (or sell) silver and gold, it is not really reflecting the price on the street where you and I have to go to buy a one ounce coin or other inflation hedge such as so many people are doing now.

Hence the price of gold at your local bullion dealer has been significantly above what you see online as the “market price” of gold (or silver or platinum, etc.).  Enter… The Ebay Factor!

I have been buying and selling gold and silver on eBay for nearly 5 years now and consider it to be the “true” market price as it is a) widely available and b) has a broad selection of inventory (something tough to come by at a dealer these days).

There is a site that has set up a seemingly endless combination of search bots that can tell you whatever you want to know about the price of gold and silver on ebay.  Current listings for all kinds of different products (and countries of origin), average sold price, % above spot price things are selling for, etc.  It’s absolutely awesome … especially for a trader like me that wants to buy low and sell high.  I can keep an eye on how things are playing out and jump in and buy when the trend is down and toss items up for quick auctions when the price trend is up.

Check it out.  The site is www.24gold.com and the links for silver and gold are below.  Happy Bidding!

gold on eBay

silver on eBay

Carmakers Squirm While Banks Take the Cash

The stock market right now is quite a chaotic place.  Much of the volatility is centering about carmakers and why or when or if they will get the hand out filled by more money from the taxpayers and US Govt.

Some people cannot figure out why the banks have been plied with cash but all of sudden everyone in Washington is getting squirrley when it comes to handing over money to GM, Ford, and Chrysler.

My two cents is that this is part of the collateral damage from our economy moving towards financial products and away from manufacturing that has gone on for decades.