What's Happening to This Market?

Fourth quarter GDP (5.7% annualized) blew away everyone's expectations, consumer confidence is up, manufacturing's up, and most importantly; Microsoft, Amazon, Intel, IBM, and something like 86% of the rest of the companies reporting have either met (8%) or exceeded (78%) earnings estimates. If you'd have told me all this on top of last week's huge political upset in Massachusetts, I'd have told you the Dow would be somewhere north of eleven-thousand right about now.

So what on earth is going on? Well.... there's China upsetting the global-growth apple cart by tightening their monetary policy. Then there's the sovereign debt worries over in Europe. Then there's the proposed bank-tax that was announced just before the market began heading south (hmm). Then there's the so-called "Volker Plan" (more bank hammering) announced by President Obama last week. Then there's the fact that the market has not sustained a single correction (10% drop) since it bottomed on March 9th of last year. Then there's a few more 'then there's', but we'll stop with these.

It seems that for every good bit of news there's an offsetting downer (or two), and it appears for the moment that the market's looking for any excuse to sell off.

But honestly, while all them 'then there's' are surely weighing on the market, I'm thinking this sell-off is more about what the greenback's been up to than anything else.

Throughout last year I offered up a number of commentaries on the inverse relationship between the dollar and the stock market. If you were to lay one chart on top of the other, you'd see perfectly negative correlation all through 2009. I.e., when the dollar declined the market gained, when the dollar gained the market declined. And if you did the same charting for the past few days you'd see the exact same story play itself out.

So as it turns out, our currency is indeed reflecting the recent good news, and quite frankly, a stronger dollar, in spite of what it does to the market (short-term), is ultimately a very positive thing for the economy.

Now if you're totally confused, I completely understand, this stuff ain't easy. Therefore I've included the following excerpt from a previous blog that should help you put this current dollar/market relationship into perspective.

Why A Down Dollar Means an Up Market (Short-term)

What's Happening to This Market?

Fourth quarter GDP (5.7% annualized) blew away everyone's expectations, consumer confidence is up, manufacturing's up, and most importantly; Microsoft, Amazon, Intel, IBM, and something like 86% of the rest of the companies reporting have either met (8%) or exceeded (78%) earnings estimates. If you'd have told me all this on top of last week's huge political upset in Massachusetts, I'd have told you the Dow would be somewhere north of eleven-thousand right about now.

So what on earth is going on? Well.... there's China upsetting the global-growth apple cart by tightening their monetary policy. Then there's the sovereign debt worries over in Europe. Then there's the proposed bank-tax that was announced just before the market began heading south (hmm). Then there's the so-called "Volker Plan" (more bank hammering) announced by President Obama last week. Then there's the fact that the market has not sustained a single correction (10% drop) since it bottomed on March 9th of last year. Then there's a few more 'then there's', but we'll stop with these.

It seems that for every good bit of news there's an offsetting downer (or two), and it appears for the moment that the market's looking for any excuse to sell off.

But honestly, while all them 'then there's' are surely weighing on the market, I'm thinking this sell-off is more about what the greenback's been up to than anything else.

Throughout last year I offered up a number of commentaries on the inverse relationship between the dollar and the stock market. If you were to lay one chart on top of the other, you'd see perfectly negative correlation all through 2009. I.e., when the dollar declined the market gained, when the dollar gained the market declined. And if you did the same charting for the past few days you'd see the exact same story play itself out.

So as it turns out, our currency is indeed reflecting the recent good news, and quite frankly, a stronger dollar, in spite of what it does to the market (short-term), is ultimately a very positive thing for the economy.

Now if you're totally confused, I completely understand, this stuff ain't easy. Therefore I've included the following excerpt from a previous blog that should help you put this current dollar/market relationship into perspective.

Why A Down Dollar Means an Up Market (Short-term)

More Random Thoughts

Jobs
The economy (and a politician or two) needs companies to start hiring. And while things are picking up, businesses are scared to death over what the future holds in terms of taxes and regulations. They

Marty's January 27th Market Report and Tip (video)

Toxic Asses

Facing the coming mid-term elections and feeling a poll-inspired sense of desperation, our chosen few are in dire need of a villain. They need to champion themselves against a bad-guy and, in the absence of any, they will indeed manufacture one. Today their synthetic scoundrel would be Treasury Secretary Timothy Geithner

My Market Prediction

Robert Prechter, "the man who predicted the 1987 market crash", in a CNBC interview during the noon hour (pac time) predicted that we're in for "at least another large wave down". Sue Herrera, as I type, credits his comments for wiping out today's gains.

Just for fun I went to CXO Advisory Group's Guru Grades website and checked out Mr. Prechter's record back to January of 2003. The following are his comments followed by the ensuing 254 day move in the S&P 500:

1/30/03: "the worst part of the decline is somewhere just ahead of us": +34.5%
6/30/03: "the Dow is currently headed down. Ultimate target: at least below 4,000": +16.4%
5/11/04: "a stock market crash began Thursday": +5.3%
10/20/05: "Expect the market to develop into a crash, with panic increasing into Halloween and then culminating within hours": +16.9%
10/28/08: "We look forward to the point when we will put our cash bact to work in the investment markets, but that day has not arrived yet": +10.2%
3/4/09: "Some measures of investor pessimism have reached extreme levels, suggesting the decline has reached its latter stages. But it's not over yet": +43.2% (126 days)
4/2/09: "based on our projections, the bear market is more than halfway done in time. It isn't less than halfway done in price however, as the steepest portions of the decline lie ahead: +26.7% (126 days)

There were a couple more recent comments, but as you might guess, they were very bearish and the subsequent days showed gains for the S&P. There is a mysterious gap between '05 and '08, although I would imagine he was nothing but bearish then as well. And of course, beginning in October of '07, he'd have been very right for a good year and a half.

So there's no doubt he predicted the '87 crash, and although it wasn't documented in my source, I'm sure he guessed the last one as well. And make no mistake; this guy will accurately predict every bear market to come. He'll just continue to miss all the bull markets I guess...

As for yours truly, I almost never make predictions, but I have been doing my own painstaking research the past few months and I've come to a very important conclusion. So just this once I'm going to stick my neck out and give you my forecast, based on my exhaustive scientific study.

The market will go down, then up, then down, then up, then down again, then up again. And while my research indicates that it's impossible to predict the timing, it tells me that this phenomenon will continue literally for decades to come.

So prepare yourselves :)

Take care,
Marty

A Few Random Thoughts

A few random thoughts inspired by last week

Not On Their Watch

As I suggested the other day, my aim here, when we're talking politics, is to cut through the CRAPP (constant reckless abuse of political power), which is (primarily) what's been troubling the market this week.

Now Washington has made it clear in recent months that banks need to get back to the business of lending. So if you

Marty's January 20th Investment Report and Tip (Video)

Ahhh

The Politician and the Slightly Cynical Consumer

I like to think of myself as a calm, peaceful, somewhat pensive individual. However I've noticed (these days) that my resolve meets with great challenge virtually every time I turn on a cable news program. And I

The Tortoise and The Armpit Hair - And - The Current Risk in Bonds

It

Marty's January 13th Market Report and Tip (Video)

What The ....!

I know I must be missing something here, but I swear, something here is amiss. It was just the other day when our leaders in Washington were all over the banks for their lack of lending. And now, unbelievably, Washington is talking about imposing a big-time tax (or fee) on the banks that took from the TARP? That

You've Got To Be Kidding Me

With bent brow he peers above wire-rimmed glasses resting near the tip of his nose, his gaze descending upon three dozen young under-(frontal lobe)-developed college freshmen. With blatant contempt for the values that built a great nation and provided him a platform to stand above the impressionable, the pretentious PhD addresses his barely post-adolescent pupils. With incomparable eloquence he marvels the lower-classmen. His charge is to teach, his objective to impeach. To impeach a commoner

The Matters That Matter

Please take a moment and read the following excerpt from my next, yet to be titled, book. While I

Dumb De Dumb Dumb

I