Although the crush of great economic news, coupled with Greenspan throwing another wet blanket on the party spooked DOW last week, a closer look at the Wilshire Growth Index, the NASDAQ and the SOXX show real strength and momentum.
If people really believed the Fed could kill this rally, then the “growth stocks” should have underperformed the value index, not vice versa.
Also, the 90 day T-Bills indicate the end of tightening is nigh, and they are usually the best indicator of Fed moves.
Greenspan’s last curmudgeony statement was made in Mexico on the 14th, which was a Monday. That rant bought the market to a screeching halt (the NAS was up 120 points in 12 sessions having finally broken out of range while the DOW was up 450 points during the same run) for 2 days of consolidation before it resumed its uptrend of another 80 points for the NAS to date and 250 for the DOW). So while the DOW shows some signs of slowing, the other indexes look happy and healthy coming into the last month of the year.
It really is just like a neighbor complaining about a party in your house, everyone turns down the music and tries to be quiet but, if it’s a good party, it cranks right back up within 15 minutes.
In my 11/14 article I suggested that the best thing for the markets would be to distract Greenspan by throwing him a bunch of retirement parties and I want to thank the International community for getting behind me on this one. Especially the Mayor of London for going above and beyond by dragging the old man out of Friday’s meeting early and taking up the rest of his day with a Key to the City ceremony.
Unfortunately, Sir Alan (shh – that’s our next planned distraction!) will get another shot at us on Monday so we might be in for a rough start to the week.
After Mexico, the market took 3 sessions to recover its momentum so Monday is likely to be a timid day where everyone searches for direction, but it is possible that the market could come screaming out of the gate in the morning as well if Greenspan’s comments are more benign.
There is just too much good data to ignore:
- Real GDP growth has averaged 4% for 3 years, the best numbers since the mid 80s when the indexes doubled.
- Business profits are up as well.
- S&P p/e ratios are a very low 14.
- Productivity is still increasing.
So I’m back to bull mode overall, even anticipating Monday and Tuesday to present us with some buy opportunities as our Fed Chairman continues to guard the gate to DOW 11K. Intel gives guidance next week and that will be a lot more compelling either way than anything Mr. Greenspan might say. If we go down on Greenspan’s Monday comments, Intel will either reverse it or put the nail in the coffin.
Last year Intel was damaged by worries of excess inventory but this year the concern is on shortages (you just cannot make analysts happy!) but with all the ads for $400 PCs I’m seeing, I can’t imagine this quarter can be a problem, it’s the guidance that will make the difference.
