Friday, July 04, 2008

Stock market: not looking good

When I got yesterday's Lowry's figures, I gasped. I've been following the Lowry's service since the '60s, and I've never seen figures like these. The spread between the Buying Power Index (demand) and the dominating Selling Pressure Index widened yesterday by 20 points (supply surged while demand sagged). The negative spread as of yesterday was 504 points. This is the greatest negative spread in the 75-year history of Lowry's.

Even at the disastrous 1974 bottom, the spread was about 265 points. Of course, volume is higher today and there are more stocks traded today; nevertheless, the Lowry's studies are telling us that this market is severely oversold, even allowing for all adjustments. And still there are no signs or hints that a great bottom has arrived. With the Dow at its lowest level since August 2006, and with the Transports finally melting, the market apparently is fated to go lower. It will continue to sink until the institutions enter the market in a major way and at last establish a bottom.
The places to be are in cash (T-bills) and gold (your choice as to what proportion of each to be in).

Why is the market heading down so persistently? I could spout for hours about the fundamentals, and you probably could too. The best answer is the simplest and most direct answer. This market continues to go down because it has not yet fully discounted the worst that lies ahead.

And what might that be? I'm not going to get into that -- you want to know how bad it can get -- turn to Noriel Roubini on the Internet or Doug Noland or John Hussman or any of a hundred well-versed bears. I deal with the market, I listen to the market. My job is the market. What I'm interested in now is what level will the market have to sink to -- before it has finally discounted the worst.

I don't think 98% of investors, and this includes professionals, have any idea of how fragile this market is, and how close the price structure is to a dramatic collapse.

2 Comments:

Anonymous theinvestingspeculator said...

Ausralian market will be great for years to come because of the natural recources. The US market will be terrible for years to come. Everyone likes to talk about stock for the long run, but between 1966-1981 they went nowhere. Sometimes they go down for long periods. I will give you 3 reasons stocks will go down @
www.theinvestingspeculator.com

12:42 PM  
Blogger Andrew said...

Like you, I follow the market, politics and all the other relevant barometers that might give some insight into the future. The interesting thing, however, is for those that are not paying attention to these things, life is pretty normal. Yeah they hear of the fragilitiy of financial markets etc, however, it seems that those that are really feeling real anxiety over it are the ones following ever bump in the road. Kinda interesting isn't it?

9:28 PM  

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