stock market

So many things going on right now and so many things about to happen. First, let's go back to a 1943 Disney cartoon called Chicken Little.

That was a little parable about the threat of Communism, a threat we still face today. Sure, there's no more Soviet Union and no more Mao. China has adopted a sort of state-sponsored capitalism. The threat isn't from without, it's from within. The DNC was taken over by leftists* in 2007 and the first thing they did was change the rules that governed them. They changed them again at the RBC meeting on May 31, 2008, thus ensuring that Obama would win the Democratic primary. The sky fell and we ended up with president Obama.

A lot has been going on in the world lately and I've been wanting to write about it. A blank word processing document has been open on my desktop for days now, residing behind Safari pages, but only now do I feel compelled to write something. The topics of interest have been jobs, the stock market, and the economy; Iran, Afghanistan; Obama, Congress, and ClimateGate. This is a busy time of year so it's hard to keep up. To keep things simple, I'd just like to list the topics with a brief comment on each.

Jobs, Market, Economy

The new unemployment numbers came out today and they were much better than expected. Only 11,000 jobs were lost in November and the unemployment rate declined to 10%, down from 10.2% in October. Job losses for a couple of preceding months were revised downward. The trend is certainly encouraging but it'll be a while before we're out of the woods.

We sure had a nice rally yesterday with the markets going up 6.6% to 6.8%. It was based on three positive bits of news, according to CNBC:

1. Geithner's bank plan

2. Existing home sales up 5%

3. Word that Republicans will delay a vote on the 90% tax bill by a week

Will this rally continue? Maybe but my guess is it won't, based on several reasons. Monday's action was a breakout that sent the market busting through resistance and past the 50 day simple moving average. The RSI level for the Dow is at 60 and every time it hits that level it signals a downtrend. The Stochastic level hit 100 and every time that has happened, the Dow drops soon after. These indications show an overbought condition which is a good time to take profits.

At some point this year, we'll have a sustainable rally that'll last months, not days. A sustainable rally is one based on fundamentals like earnings and positive company guidance. The stock market often rebounds months before solid economic improvement in anticipation of it. If investors believe that the recession will end by the end of this year or early next year, the stock market will start a sustainable rally during the summer or fall months.

I've been overwhelmed lately with my bathroom renovation plans but I'm still trying to stay current on what's going on with how this administration is dealing with the economy and the reaction by the stock market. This is just a quick update on what's being said in some circles about what's going on and how we got here. Hope you find these articles as interesting as I did.

First, a couple of takes on how we got here. I have my own ideas but it's good to sample a range of opinions:

Fluke? Credit crisis was a heist - MSN Money - Jubak's Journal

What went wrong

Next, one of the tax consequences of the Obama administration:

Obama and Your Electric Bill - HUMAN EVENTS

Considering the dramatic impact a doubling of utility bills would have on consumers and the economy, it doesn't make sense that Congress would pass such a damaging cap and trade measure.

So, just what do a Nobel prize winning economist and a conservative think of how this administration and Democratic Congress are dealing with the economy?

The destruction of wealth since Obama was elected and since he took office 6 weeks ago continues unabated, even after trillions of dollars have been spent or pledged by this government. Indeed, the latest Rasmussen poll of Obama's job approval rating is now at 56% and the presidential approval index stands at +8%, the lowest levels so far.

A thin majority thinks this country is on the right track but that's likely to change as more people become aware of the fact that we've jumped clean off the tracks and headed for a wreck. This is the time to fix the fundamental problems with our economy, not the time to introduce a radical new social agenda. This is the time to use our treasury reserves wisely, not the time for feral swine in Congress to deplete our resources on frivolous spending projects.

Tuesday's attempt at a rally fizzled but the futures are up again, setting the stage for another try. I've been collecting some thoughts about what's going on just in case you might find something of interest.

Steep Market Drops Highlight Despair Over Rescue Efforts - NYTimes.com

Obama’s Health Plan, Ambitious in Any Economy, Is Tougher in This One - NYTimes.com

The stock market broke all resistance today with the Dow below 6800 and the S&P 500 near 700. We haven't seen the bottom yet but the market is oversold and due for a rally this week which could start tomorrow morning. If it does happen, and that's a big if, it might only last a week or so before heading still lower. That's the way these things go, just the nature of the beast. Futures are looking up a bit so there's a chance.

Be careful when dealing with bear market rallies. If you manage to buy on the dip, that's great, but be ready to get out fast when the stock moves higher on lower volume. Take a look at this historical chart of the DJIA at the onset of the Great Depression:

Dow Jones Industrial Average (1920 - 1940 Daily) - StockCharts.com

Tonight's chat, thanks to NH, was fun during Obama's address and Jindal's response. I'll leave it to others to comment on how they did so this is an effort to answer some questions that came up during the chat.

Why is it a bad idea for some governors to refuse the stimulus money?

By accepting the money, a state has to commit to funding new programs or extensions of existing programs that there won't be any money for after two years. Some states would be better off doing things differently. They wish they could just accept the infrastructure money that would have been available in a regular appropriation bill. By packaging so much stuff in one bill, states are being forced to do things they don't want to do. For more, see: Some states may shun stimulus funds | csmonitor.com

I've been spending a lot of time lately reading up on the economy and reassessing my expectations for the stock market. I've also discussed my findings with a government economist who's in agreement with my understanding of what's going on. Suffice it to say, things are going to get a lot worse before they get better and we haven't seen a bottom in the stock market yet.

There are so many things I could write about that aren't good news but this is something that is good news. We're in the midst of the holidays so why not look on the bright side for a change. Thanksgiving went well here, I did all the cooking, everyone survived and I'm happy.

Black Friday sales were expected to decline but they didn't. Sure, the gain was less than last year but still up 3%. The average increase is 4%. Some store mavens were expecting a 1% increase.

Personal income rose .3% but analysts had expected only a .1% increase. Maybe things are nearly as bad as we've been led to believe by the media punditry.

OPEC met but there are no further production cuts planned. Energy prices for gasoline, electricity, and home heating are down to affordable levels.