Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Negative Reactions

Stock-Markets / Stock Markets 2010 Jan 20, 2010 - 02:03 PM GMT

By: Paul_J_Nolte


The economic data continues to disappoint, although may are looking at the bright side (at least it is not as bad as last year!). However, the bit of “news” that surprised investors was news from JP Morgan as they released earnings data that they will be stashing more reserves away to cover additional loan losses. That took the markets down a peg and increased investors concerns that just maybe the stock market and economy are moving in two different directions.

Retail sales fell in November, while holiday sales rose 1.1%, inflation remains tame and while capacity utilization rose, it remains in territory usually seen during recessionary periods. Also near recession levels is consumer confidence, which barely budged during the month. Investors, however were much more excited and according to Investors Intelligence, the percentage of bulls is now the highest since the end of 2007. Is the JP Morgan warning company specific or a sign of more bad news ahead? Earnings reports, especially other banking companies reporting on Wednesday, should provide a better answer.

The reaction to corporate earnings, so far, has generally been negative, but not enough to warrant selling everything to cash. One concern that bears watching is the volume during advancing vs. declining days, as this week was yet another period where volume expanded on declining days and contracted on advancing days. The metric peaked in Sept. ’09 and has been in a sideways band ever since. While the markets are up about 6% since this indicator peaked, the net number of advancing to declining stocks as well as overall advancing volume still is swamping those on the decline – hence the reason for the gains in the indices.

The expanding volume indicator was well ahead of the overall market decline, as the last big peak was early in ’07, six months before the indices began their decline. Weakness in many of the technical indicators are symptomatic of a tired market that can still rise, but the days of wine and roses are likely in the rearview mirror. The expectations coming into this year were for a relatively strong first quarter and weakness into the fourth quarter. So far, the overall game plan is still in place.

Investors scurried back into Treasury bonds last week as commodity prices eased and the equity markets displayed some weakness. As a result, the bond indicator flipped positive for the first time in a month. Expectations are that the bond model can make abrupt changes and as a result, we like to see at least two weeks in the same direction before declaring that interest rates are likely to either rise or fall (in this case fall).

There are strong arguments on both sides of the yield picture, one saying rates can fall due to lack of economic strength and a reluctance of the Fed to begin removing excess money from the system. The other is concerned about inflationary pressures that are likely to build due to the very easy money that has been in place for over a year. This week, the betting is on continued economic weakness.

By Paul J. Nolte CFA

Copyright © 2009 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

© 2005-2022 - 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