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Tuesday, September 21, 2004
Market Recap
The markets got off to a sluggish start today, basically on hold for the Fed's decision on interest rates hikes. Once the decision was announced, the markets had very little initial reaction, but about 45 minutes after the announcement, the buyers came in and the markets began to climb. The fed decision was no surprise, and with the market going up on the news, it shows that this rate hike was already priced in. The Dow closed up +40 points, the NASDAQ gained +13 points, and the S&P gained +7 points. Again, the market had moved before the news and predicted this interest rate hike; this is why there was no sell off. Had the decision been a surprise, then the markets would have most likely sold off. Markets should not be going up when interest rates are going up; it is because the market has already forecasted these last couple of interest rate hikes that there has not been any downward movement. This is a very bullish sign going forward.
Small Caps on the Move
It was a big day for some small cap stocks. They have been moving the last few days, but today there was some serious volume going into many small cap stocks. Most of these stocks had charts that were less than desirable, but when stocks hit bottom (and we never know when that will be), they make massive gains with sometimes straight up moves that can double or triple in days. Some of these stocks are doing this now but they are very hard to find before the initial moves off the bottom. If the charts are bad in the first place, they do not show up as possible movers. Hitting the bottom of any stock requires a good deal of luck most of the time. I will be adding some lower priced small caps to our list as the charts improve. I have added two tonight to get us started.
Higher Rates Bad for Some Sectors
Keep an eye on the housing and auto manufacture sectors in the coming weeks. As interest rates continue to tick higher, the housing market will start to show signs of turmoil. As we enter the latter part of the year, housing traditionally begins to cool off. Home owners do not put their homes on the market as winter approaches, and builders also tend to slow down in the winter. Projects that have not been framed up and completed on the outside before the snow starts to fall will often be put off until spring.
Car manufacturers will start to offer greater incentives as rates rise. They will do this to sell vehicles but it will eat into their bottom line. There will be a good chance they will guide earnings estimates lower. The stocks should react negatively to this news.
Looking Ahead
The markets are reacting well, and if you take a look at the bulletin, you can see that we have been turning more bullish in our watch list by adding more and more longs each night while the short list dwindles. With today's positive reaction to the interest rate hike, the market is telling us it is not bothered by these rate hikes. This could potentially begin the pre-election rally we have been expecting. Also keep in mind that October and November have been good months for the markets on a historical basis. I am looking forward to another end of year rally, and the charts are shaping up to suggest we may get one.
OTC BB Stocks
- ANTR: Closed at HOD, Still looks good tonight
- AOGI: Nice move today after our mention here last night.
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