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Wednesday, October 06, 2004
Market Recap
It was a remarkable day in the stock market. The Dow is up +62 points, the NASDAQ is up +15 points, and the S&P gained +7 points. Why are these small moves so remarkable? It is because crude oil prices hit another record high today and closed above $52 per barrel. Black gold is on fire and the stock market could care less. This is one resilient market right now, and it is holding up very well in the wake of this ridiculous oil run. That says a lot for stocks because you have to believe when and if oil starts to come down, the stock market should thrive and make a nice run up. Today, the NASDAQ closed up for the seventh day in a row. You have to go back a long time on the charts to find the last time this happened. It was a late afternoon rally in the market as the smart money came in to close all three of these indices at their highs of the day. More importantly, the NASDAQ closed above its 200 SMA. This key close puts this index in bull mode and should lead to much further advances for the last couple months of the year. Since it has been up for seven straight days, a pause is due.
Bulletin Stocks
It was an incredible day for a lot of bulletin stocks despite oil prices being up. Stocks like, BCON, SNG, AKS, SNDA, AIRT, TOPT, EGY, and SOSA all made excellent moves. As you can see by our current bulletin, we are trimming down our short list and our long list is beginning to fill up quickly. Going forward, the big money will be made on the long side of the market so I will concentrate on just long positions. There are still a couple of open short positions that I will cover in time.
The Message of the Market
Job numbers are not looking very solid at all. There are reports out that companies are planning some very large cuts this quarter. It is possible that a part of that could be farm labor cuts. With the harvest season coming to an end, those jobs will be lost for the winter. There will be some hiring coming up soon for the holiday season. Retail stores and shippers always need extra hands during the holiday season. Still, the job cuts are somewhat disconcerting.
Companies that are having a tough year will cut the workforce in an effort to boost profits. Fewer salaries translate into a short term boost in profits. However, this is not a permanent fix to profit problems. It is very temporary and may last for a quarter or two. The few remaining workers somehow handle double the tasks, and the corporation benefits from the reduction in payroll costs. Those same companies will hire again after the first of the year as they realize they cannot get the same performance out of overworked employees. It is a vicious cycle and it is bad business.
The Trickle Down Effect
This is a trickle down effect on other businesses. These job cuts mean fewer consumers during the holidays. That means less revenue streams for a number of other businesses. Anyone who is fearful of their job will cut back on their holiday spending, and that is bad for the economy. Even the workforce that still remains is likely to curb spending, fearing they may be next.
I have been cautious lately as the markets have rallied. Markets move in advance of news and lately the markets are moving well. Charts are setting up for a nice advance, but we are not hearing very much good news right now. This has me wondering what the market really knows that nobody else does. I know the economic and geopolitical news has not been good, but the message of the market is contrary to the news we have been hearing. I do not see enough evidence in the economic news to tell us we are ready for a market advance, but the charts are sending us a different message. Will we see $60 per barrel for oil? I think we will get close, and if we do, the stock market should be going down. These are very confusing signals that do not add up. We will follow the charts and let them be our guide.
OTC BB Watch List
- TRLG nice basing process, see chart tonight.
Here are some recent IPO's with good looking charts. They will not be added to the Bulletin because the volume is too thin.
- LMRA
- LPL
- SRVY
- RNOW
- ECST
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