It's probably not a "market" for men or women of any age at this point. Warren Buffett has put himself out there recently buying stock inBank of America (BAC) and then suggesting Friday it might take 3-5 years forthe company to clean things up. He also stated he's received inquiries fromEuropean banks for a financial injection which isn't a good sign. He's alsobeen highly visible averaging down buying shares in his own Berkshire Hathaway (BRK/A) with $5 billion in purchases already this quarter.
He says he likes the president's jobs bill although admitted to not knowing its details which is poor due diligence. He's also unsure of just what Obama's "Buffett Rule" means as it applies to incomes over $250K deflecting the level by talking about people making $50M or more. All this struck me as interesting and odd. But Buffett is much followed and has made more good calls than bad and has achieved great things. But we can have a little fun if we like too.
In the meantime there wasn't any "stick save" to end the third quarter as stocks were crushed Friday. Certainly bulls tried hard in previous trading days to lift markets but today investors sought the comfort of bonds and the sidelines.
Speaking of bonds, the Fed has announced its October
for "Operation Twist". Not so coincidentally
Fed Governor Bullard
was out speaking today saying the Fed could increase its asset purchases and ease interest rates further if the economy doesn't respond. (Code: "We want higher stock prices".)
Economic data on the day was positive in the U.S. overall with the Chicago PMI at 60.4 vs expectations of 55.4 and Consumer Sentiment at 59.4 vs 57.8 expected. Personal Income and Outlays was weaker at -.1% vs .1% expected and .2% vs .2% expected. The economic data that moved markets lower early was the third monthly lower manufacturing report from China and dismal Retail Sales data from Germany adding to the sense of a global economic downturn.
The euro zone continues to frustrate most investors with drama and data. Below is a chart of the E.U. Misery Index and it tells you just about all you need to know.
Investor psychology isn't helped when an old bell weather blue chip like Eastman Kodak (EK) may file for bankruptcy protection. EK was once a stalwart DJIA component that was dropped some time ago. This is how things go with evolving technology--if you don't keep up, you're out. It's also the way the DJIA gets revitalized as losers like EK and more recently Citigroup (C) get dropped from the index. Also today Morgan Stanley (MS) was down over 7% as worries persist that the company is having some difficulties, all strenuously denied.
So for stocks overall this is the worst performing quarter since 2008 when we were entering a bear market. Are we due for a repeat or is this just a continuation of the previous bear market? It gives us a sense of a 1930s like market which featured substantial bear market rallies. For the quarter the DJIA was down 12%, S&P 500 down 14.3% and Nasdaq Composite down 12.9%. European stocks in aggregate lost 17%.
As stated, bonds rallied as stocks sank and gold was somewhat higher. Other commodities (base metals, agriculture and energy) struggled. The dollar was stronger given a flight to safety.
Volume was about average for the period Friday while breadth per the WSJ was quite negative and in some respects perhaps a 10/90 day.
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is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.
McClellan Summation Index
is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.
is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.
Continue to Concluding Remarks
What's left to say after a quarter like this? For the most part we're fortunate to have been in cash during the quarter with the exception of our lazy and lazy hedged portfolios. Some of the latter are suffering more than others. For trend-followers like us it's been a difficult time to find positions long or short that can be placed with reasonable risk levels. It's just the way of things as markets fight hard to prevent a third bear market in the last 11 years. And, you'd be right to say the last time this occurred was during the Great Depression.
The most important items next week will be the employment report Friday, POMO (QE3) and earnings.
Let's see what happens.
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The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren't predictive of any future market action rather they only demonstrate the author's opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
Dave Fry is founder and publisher of
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, published by Wiley Finance in 2008. A detailed bio is here: