The market took one on the chin yesterday with the result that the gains for January were just about wiped out.
The sell-off accelerated as many traders realized that it was impossible not to forecast a recession. While that is hard to believe, it seems that reality had not fully sunk in. The trouble started the night before as Alcoa announced major lay-offs of some 13,500 employees, which was followed by earnings warnings from Intel and Time Warner.
Crude oil plunged as falling demand caused oil inventories to rise. ADP’s payroll survey put down any remaining bullish hopes for the day as December’s whopping losses of 693,000 wrapped up one the worst years in history. This will not bode well for Friday’s jobs report, which also may turn out worse than expected.
It was a day of no positives as now India got rocked by its own version of the Enron debacle. As was to be expected, our Trend Tracking Indexes (TTIs) slipped and are confirming their position in bear market territory:
Domestic TTI: -8.44%
International TTI: -18.17%
I can still see more upside potential as part of a bear market rebound, but I still believe it’s better to stay away from any outright long or short positions.
Comments 4
Uli – your usual (and much appreciated) cynicism must have deserted you when you wrote “….many traders realized that it was impossible not to forecast a recession”.
What really happened is that “….many managers and brokers, having shaken down the gullible yet again with promises of a new buying opportunity, have taken their gains home and are sitting on their yachts as the depression unfolds. The gullible, of course, will go on to lose another 20-40% in 2009.”
Ulli:
Three items:
1. Many thanks for your closing comment ‘I can still see more upside potential as part of a bear market rebound, but I still believe it’s better to stay away from any outright long or short positions’. This has put to rest my temptation to go short.
2. Can you please tell us more about TIP and compare it to bond ETFs. When interest rates rise, bond prices tend to go down. How about the price of tips? Will they also go down when interest rate raises? Can you pleae elaboare more about TIPs and its role in our investments.
3. You had told us that you will come out with a booklet on hedging. Can you please make it available soon?
Many thanks.
Stranger.
Tom,
I appreciate your clarification…
Ulli…
Stranger,
TIPs usually move along with bond ETFs, but are supposed to hold up better during inflationary times. Whether this will actually play out that way, is still to be determined once inflation rears its ugly head again. I don’t see this happening in the foreseeable future since we are currently in a deflationary scenario. If you watch the trends, you’ll see how TIPs are holding up once inflationary times return.
My hedge project is running behind schedule (no surprise there), and I’m spending additional time on it, since 2008 offered quite some surprises, and I want to analyze all of my findings.
In due time, I will make some announcements.
Ulli…