Ready to Bounce
January 9, 2005
I was scrolling through some charts of the major indices this weekend and was struck by the near uniformity in last week's sell-off. All the major indices that I follow sold off to similar support levels. The exceptions are quite notable… and disconcerting. Recall that the market's main excuse for the weakness was that the Fed has become a lot less friendly toward the speculative excesses in the market. This portends a Fed that will be relentless with interest rate hikes, and a Fed who will finally begin to defend the dollar again. Gold has been a big loser of late and commodities in general have been taken out of their leadership position. The stock market in general though is proving somewhat resilient and now looks ready to bounce. I am still inclined to think we have seen the market's highs for a while, so I suspect any bounce we do get will be a temporary salve on trader's and investor's wounds. The main storyline that could "save" the market are corporate earnings and forecasts that are either well above expectations or are either so bad that folks will think things cannot get worse. Either way, January should continue to be a stomach-churner.
I present a bunch of charts below with some commentary to tell the rest of the story.
Be careful out there!