Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Global Economic Tensions Translate Into Oil Price Volatility - 22nd May 19
The Coming Pension Crisis Is So Big That It’s a Problem for Everyone - 22nd May 19
Crude Oil, Hot Stocks, and Currencies – Markets III - 22nd May 19
The No.1 Energy Stock for 2019 - 22nd May 19
Brexit Party and Lib-Dems Pull Further Away from Labour and Tories in Latest Opinion Polls - 22nd May 19
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19
It’s Not Technology but the Fed That Is Taking Away Jobs - 16th May 19
Learn to Protect your Forex Trading Capital - 16th May 19
Gold Ratio Charts Offer The Keys to the Bull Market - 16th May 19
Is Someone Secretly Smashing the Stock Market at Night? - 16th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

NOLTE NOTES - Stock Market Rally - Where's the Volume?

Stock-Markets / US Stock Markets Oct 08, 2007 - 11:45 AM GMT

By: Paul_J_Nolte

Stock-Markets Imagine watching your favorite football team on a Sunday afternoon and hearing the following from the announcers: “without any penalty flags, the (your team!) will be starting at the 50 yard line instead of inside the 5 where the ball was whistled dead”. You'd be turning up the volume way high to figure out what just happened. The economic figures on employment could be viewed the same way – after indicating the economy lost jobs last month, this month showed a gain AND the prior to months were revised to show decent gains – with little explanation.

We doubt the interest rate cut of two weeks ago would work THAT fast! Also hard to fathom were the announcements from the brokerage/banking community about huge losses related to sub-prime mortgages that the stock market just loved (and actually rose by nearly 200 points). The last few weeks we may have passed through the looking glass, where nothing is quite as it seems. This week brings the beginnings of the earnings season. While the Street may be discounting anything from the financial sector, keep your eyes on what companies have to say about both the domestic and foreign economies – it may be sobering.

New all-time highs on the Dow – but it came without the fanfare of the last time it closed over 14k (just before the gut wrenching decline). In fact, few companies are actually participating in this new ascent, as less than 300 new highs have been made over the past week, while three times in early July the new high list expanded that far. Volume for this rise has been notably missing and investor concerns have melted away as Investor's Intelligence is reporting the second highest “bullish percentage” this year. But as many investors remember lessons of the late ‘90s, the markets can act irrational much longer than anyone betting against it can remain liquid.

So while the markets continue their head scratching rise to the heavens, we believe that the Dow will be hard pressed to be higher than today a year from now. The assumptions that we believe are being made in the market today include earnings will continue to grow at (or near) double-digit rates, while margins also expand from their record highs. Still lingering in the background is the housing market – or maybe it was dealt with neatly in a four-week period and all is once again right with the world of high finance.

The bond model has a slippery grip on a positive reading (still at “3”), as short rates have dropped and corporate bond performance has improved. This week brings inflation data that should show that inflation remains “contained”, however we are watching the commodity index, which has been modestly higher over the past twelve months….until this month, when it has shot up over 20% vs. its year ago levels.

A year ago we saw both the energy and gold complexes decline in price in the early fall as summer driving season ended and gold was still in the process of correcting the 2005 rise. Today, although pump prices have declined some, they have not fallen as much as last year and gold remains strong, especially in the face of the weakening dollar. Last week we discussed the agricultural commodities as still rising, so while the inflation report this week might be market friendly, the future may not be as accommodating.

By Paul J. Nolte CFA

Copyright © 2007 Paul J. Nolte - All Rights Reserved.
Paul J Nolte is Director of Investments at Hinsdale Associates of Hinsdale. His qualifications include : Chartered Financial Analyst (CFA) , and a Member Investment Analyst Society of Chicago.

Disclaimer - The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable, but are opinions and do not constitute a guarantee of present or future financial market conditions.

Paul J. Nolte Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules