Obama’s Jimmy Carter ‘Malaise’ Moment?
- Market closes out quarter still unable to hold gains, but still . . . in the trading range.
- Economy in a modest data bounce with Chicago PMI the latest.
- Income and spending fade with incomes showing negative returns.
- Sentiment very negative: CNBC commentator says has not seen sentiment this bad in his memory.
- Obama’s Jimmy Carter ‘malaise’ moment? Says the US has ‘gotten a little soft.’
- At the bottom of the range to start the fourth quarter. Time to bounce? Into earnings?
Bad quarter, but starting Q4 at the bottom of the range.
It was a down close to a down quarter on Friday. The indices fell back toward the August lows. SP500 held at the upper range of the low. Some of the others, such as SP600, came back almost to the prior lows. Not a banner day, but the buyers gave it a shot after a lower open. They rallied the market on some better news. Income and spending were not great. They were down from the prior month and July, but the Chicago PMI came in at 60.4. That was much better than the 54 expected, and it topped the 56.5 in September. There is some improvement, but it was not enough to keep the market up on the day. Stocks rallied toward lunch. They tried to get back to positive but never made it, and then they rolled back to the downside. It was an ugly close. There was no last-minute window dressing. Apparently that was wrapped up on Wednesday. If there was window dressing, it was basically throwing out a lot of stocks.
That took the indices back down to near their August lows. They did not break them. As I have been talking about all along, stocks and indices still in trading ranges are still in trading ranges. Yes, it was a negative close to the quarter. It was a negative quarter, but most of the damage was done in this late-July/early-August selloff. The rest of the quarter they spent their time working laterally in a trading range. They have not given that up. We also have Q4 starting on Monday. It is typically a good quarter for stocks, particularly after you have had a down quarter like the one we just logged in the books. We just need to get through earnings, and we may get a boost from earnings. We have had warnings, such as AMD. We also have a notion that there will be some positive upside as well. We will have to see whether AMD, FDX, and UPS that are warning about energy costs outweigh the positives that are supposedly still in the market that we see in some of the economic data.
The indices took a good licking on the day.
NASDAQ, -2.6%; SP500, -2.5%; Dow, -2.1%; SOX, -3.4%.
MONDAY
There is a boatload of economic data coming out next week. We will have the ISM Manufacturing Index on Monday. Construction Spending also on Monday. Factory Orders on Tuesday. Challenger Job Cuts and ADP on Wednesday. ISM Services on Wednesday as well. Jobless Claims on Thursday, and they are expected to go back over 401K. We will see. Friday, of course, brings the September jobs report. More data than you can shake a stick at.
On top of that, it is October and we will not be able to get away from earnings. We have to go through this little ritual before we can put in the bottom in October and rally to the upside through the end of the year. That is the traditional way to look at the market. The cool thing this time is that the market has sold off into earnings. There are no earnings to sell into, necessarily; it already did that in July and early August.
After bouncing along for almost two months, now the market is at the bottom of its trading range. It is sitting on top of that Summer 2010 base. This is the point where it will bounce or it will trounce. These earnings could give the movement to the upside that the market needs the impetus to bounce in the face of an ugly Europe. We have had issues. Some of the shippers and trucking companies have been warning. Some of the tech stocks, particularly the chips, have been warning. Some retailers are not pleased with how the August back-to-school season went. As we know, truckers are not trucking as many goods to the stores ahead of Christmas. That is a concern. Retailers are not betting on a good Christmas season, and that is showing up in the trucking. Thus retailers will not be as strong, and you know what it all means. It is a snowball effect.
We are at an important point for the market. Will it hold or will it fold? We are in a new week, a new month, and a new quarter. Indeed, we have a new slate given that the indices are down at the bottom of the trading range. It is not a bad place to get a litmus test of the market moving toward the year end. As noted, it is typically an up time for the market. It is in a very good position to make a move if it will make that move. Accordingly, we have put more upside plays on the report. There are several good stocks that are still in great shape after all of this selling. That has to give you some confidence in what the market will do at the bottom of this range. They could roll over and implode. Maybe something bad comes out. Maybe Europe decides it will not bail everyone and their brother out, and then the markets do not like that and sell off. That caveat is always out there.
Technically, we have the indices down to their key support range. We have some very good stocks that are down, yes, but that are making normal pullbacks after nice runs. They can lead the market back to the upside. Maybe not a breakout. It may be just a bounce back up in the range, but they are there to do it. This is not a situation where it is total despair, where no stock out there looks like it could lead.
We will have some plays to the upside, but we are also letting our plays to the downside run. We let them run on Friday, and they ran quite nicely. If we get a bounce, we will be looking to play some more downside. This is not a moment to step in with a bunch of new downside as the market is falling back down to a support level. You do not want to buy downside into a support level. And if there is a break at that support level, you do not want to pile into the downside. Why? You will get a reversal to test it. That is what this market does unless it is cataclysmic and the mentality is “The economy is going to hell and we have to sell.” We will watch for a bounce and play it if it comes. If it does not, we will let our downside run that is currently in place. Then when it bounces back up and gives us a test of this level that fails, we move in for more downside plays at that point.
I meant for this to be shorter, but I did have a lot to say. Now I will go do an Eagle Scout project, and I will remember that there are still great things in this country. I look at these Boy Scouts and my son’s troop. He is a 13 year-old who will be an Eagle Scout. That is not a soft person. We are not a soft country. We have as much or more drive as we ever had. I look at these young men in my son’s lacrosse teams, football teams, baseball, basketball, and the scouts. I see tough, smart young men and women out there. They are not soft. They will be great.
We have to get our country back to the point that allows them to be great. If anyone perceives us as soft, it is not because of the people of the United States. It is due to those in charge who think they have to be our mommies and daddies and tell us what to do. Just let us be free. Let us be the great people that we are, and we will be the toughest, biggest, best economy and country in the world.
