Market comments for Oct. 25th, 2011

The big news this morning really came within the US, as the Consumer Confidence number was released for October. It came in at a 39.6 reading compared to September's reading of a 45.4 reading. This is the lowest reading in a while as the chart below indicates and if it continues this low for the next few months, Christmas season for Retailers is going to be very poor.


Nothing yet settled in Europe on the Greece debt issue and bailout attempts. There is a meeting tomorrow of the group and Germany will be voting at the same time as to whether they support it or not.

Market comments for Oct. 25th

Are we all excited today to see that the G-20 ended their Finance Ministers session agreeing to "try" no to do harm to each other? Traders seems thrilled today as the Dow is up about 65 points at this hour and going above the 11.200 level I said we would get to back in mid September and it may even go to the 52 week high of 11,258 before the elections.

However, I caution all you believers that this is a real Bull market Rally that Friday was the lowest Volume day since last December. When can you remember an October where Volume was so low? I can't! The Volume has disappeared this month and the Volatility Index is hitting lower lows each day, it seems, although today it is up a bit. About 10 days ago it was as low as 18. From a historic perspective, it has been much lower over the past 10 years. It was as low as 10 from about 2005-2007 and signaled the quiet before the storm which followed. In 2008 it soared to 90. So we are by no means at the lows on the VIX. But there seems to be a quiet before this election and many analysts believe that the election is already baked into the market and most likely it will selloff just when the news is in on the results. You know, it's that old "buy on the rumor and sell on the news, game.

Both short and long term stock market outlook: Successful retest of the lows and then a Bull market rally

As today closes the week of the stock market, I was influenced in posting what I did today by a commentary yesterday on CNBC by a technical analyst who had a chart of the World stock market Index which showed all markets had started to drop in the May and June timeframe. This drop was consistent across the world and was not particular to the U.S. stock market. He said it implied this drop is a world phenomena and therefore it will take the world to solve it.

I have been following the Nikkei 225 stock market Index for some time but have never posted it and the Dow as 2 separate charts on my site until now. The main thing to compare is how quickly the Nikkei showed the downturn coming before the Dow has but both charts are similar when looking at a 3 year history. Below, in the first chart, the Nikkei 225 shows they have had a double bottom which was down to about 6,500 and if we return they will have put in a triple bottom. Usually triple bottoms are solid enough of a support level foe the possible beginnings of a real Bull market rally. This is what I will be looking for as the months going into the Fall will tell if this plays out.


The Dow chart below shows we did not have a double bottom yet and that is part of the reason I am quite confident we will retest the low of 6440 on the Dow, by this Fall and certainly by October Options Expiration, which occurs on Friday, October 16th this year. This could signal the moment of an attempt of a return to the beginning of a Bull market rally, which would go above the previous high end of the range of 9,300 on the Dow. This time the S&P 500 could go back above 1000 and it will be the time when I am buying heavily at hopefully the market lows. Time will tell if this scenario plays out as much is unknown as to the outcome of the crisis in the economy. But it certainly would set the stage for 2010 and hopefully a more optimistic outlook as the peak of the unemployment should give hope things are going to turn around mid to end 2010.

Put to Call ratio on current market: Up!

The market closed on Friday with the Put to Call ratio back up over 1.00 for the second of the past 3 market days. On Tuesday, the Put to Call ratio closed at a new recent high of 1.08 while on Friday it closed at 1.05 after hitting a high of 1.14 during the first 1 hour of trading.

We have been in a market rally the past 3 months after hitting a low on March 30th and I have added some dates to the chart below to show you what was happening in advance with the Put to Call ratio. I believe this is the start of the decline I have been expecting for the past 2 months but never materialized. Rather, we had been in a very tight range causing much frustration for Bulls and Bears alike.


I believe that is about to change with Bears reaping their patient reward while Bulls wonder why they didn't take their profits while they had them. This unwinding may take us until September Options Expiration the third week of September or until October's but it will materialize. As I aid in a previous post, the ETF Bear Funds should be a nice rate of return and many not owning any might consider this play as it isn't too late to buy them. There are many to choose from and you might check to my post dated May 23rd, where I list them all. I have TZA as my readers know and also some FAZ as well. Good luck and Happy 4th of July!

U.S. Fatalities for the first 3 weeks of October, 2007

For the 3 week in October there were 27 fatalities. The first 2 weeks there were 22, so that is an additional 5 for this past week. In October of 2006 we had 106 U.S. Fatalities in Iraq. This continues to be a major story and does show that the violence is down in Iraq. It is a substantial reduction from the 106 last year.

This is one of my most positive feelings about this terrible war. I pray that this continues going forward without consideration to the rhetoric on both sides of the Iraq war debate.

There are now 3,835 U.S. Fatalities, as of the reporting this evening.

U.S. Fatalities in Iraq for the first 2 weeks of October.

For the first week in October there were 8 fatalities. That's a monthly rate of 32. The total now for the first 2 weeks is 22. In October of 2006 we had 106 U.S. Fatalities in Iraq. While the rate has increased this past week, it is a substantial reduction from last year.

Many believe the reduction has a lot to do with the new MRAP vehicles that have been delivered to Iraq in August and September. There are over 800 new vehicles in the Iraq theater. Whatever the reason for the decline, it is good news for the families waiting for their sons and daughters, mothers and fathers, and sisters and brothers, to come home safely.

There are now 3,829 U.S. Fatalities.