Weekly Risk Report 10/20/2008
The i-Wave continues near the record low it posted last week. We're seeing fewer double digit changes in the share prices and more uniform price movements. It would appear there's some stability returning at least for now. While all news has been interpreted as bad news since late September, we'll have to see how 3rd quarter earnings are received.
Further, this last week saw only 14 new highs for the last year versus around 1200 new lows. Even so, the major indexes managed to finish the week out with a slight gain over the previous Friday.
Our i-Wave remains very bullish. Three of the four components remain in their own bullish territory and the last is neutral and not relevant right now because of nearly zero IPO activity.
Even looking back over the last month or two it is hard to understand just how far fear has carried this market. Election turmoil, bank liquidity, mortgage dislocation and "negative spin" by most major news agencies have turned a reasonable economy into a circus and a "cliff hanger" into a cliff diver. If there's good news to be drawn from all of this it is twofold. 1) Weak hands have been burned and will be slow to return to the market. 2) all of the recent past has added onto the "wall of worry" which most investors will have to climb going forward. This should make for a healthier overall market going forward.
While not all is settled and not all can be known about the effect of government money being involved in the banking business, there is an apparent world wide calming that is taking place. As I look over the various Exchange Traded Funds we use in our portfolios I see a much more orderly market in every corner of the globe. The ease of selling and high level of liquidity allowed short term speculators to empty their accounts of equities around the world but not without some serious collateral damage. However, now that the selling seems to have abated to a degree cautious long term investors are using their own reserves add to their own holdings.
