Tuesday, June 29, 2010

New low

Today's closing value for the S&P 500 index was 1041, which is a new low point for this large correction. The market is currently 15% below the late-April peak, and the S&P would have to drop to 975 to make it an official bear market.

Monday, June 28, 2010

No rally yet

The S&P 500 index is still wallowing around in the price region that it fell into more than a month ago.

My best short-term guess is that this is still the bottom of a correction, and that a rally is in the future. This is unrelated to my long term prediction that another big bear market will inevitably see prices fall well below where they are today.

Friday, June 18, 2010

A breakout - sort of

The S&P 500 index has broken above its short-term upper trend line, completing a textbook W-shaped double bottom pattern that usually signals the end of a correction.

The breakout hasn't been very decisive so far, so I'm going to wait a little longer before I guess whether this is the beginning of a rally or a head-fake before another decline.

Monday, June 14, 2010

Flat trend lines

Here's the three-week chart of the S&P 500 index:

Obviously the next significant technical event will be when the index crosses one of these lines.

Friday, June 11, 2010

Ho hum

Stock prices haven't really gone anywhere in the past three weeks.

Sentiment is still pessimistic, but not extremely so. If I had to bet one way or another, I'd say the next move will be at least a small rally, but since long-term fundamentals are as frightening as ever, and since I don't have to make a bet one way or another, I'm staying in cash.

Sunday, June 06, 2010

War then and now

On this, the 66th anniversary of D-Day, Iran has offered to escort the next blockade-running "aid" convoy to Gaza. That would probably spark the next regional war in the Middle East.

Now more than ever, we need to remember why the Normandy invasion was required in the first place. In the economic turmoil of the 1930's, the U.S. and other European powers allowed Hitler and Japanese militarists to arm their countries and to conquer and slaughter their neighbors without reprisals. Not until Japan had sunk most of our Pacific fleet and Hitler had conquered most of Europe did the U.S. finally jump into action, and World War II would be very nearly won by the Axis more than once before the tide turned. In all, approximately 55 million people died in the global war.

If the U.S., England and France had been better armed in the 1930's, and had attacked and defeated a not-yet-fully-armed Germany in the 1935-1938 time frame, then the remainder of the 20th century would have been unrecognizable. Eastern Europe wouldn't have been conquered by a vengeful Soviet army (at least not in the 1940's) and tens of millions of souls wouldn't have died.

The question today is how we're going to treat North Korea (torpedoing a S. Korean ship) Russia (annexing Georgian territory) and Iran (going nuclear and threatening Israel), and it comes down to whether our leaders are students of history or the type of Utopians that pinned their hopes on the League of Nations in the 1930's. Let's just say I'm not too optimistic right now.

Saturday, June 05, 2010

What happened to the freedom movements?

After the US started flexing its military muscles in Afghanistan and Iraq in 2001 and 2003 respectively, freedom and pro-democracy movements started springing up in and around the Middle East:
  • October 7, 2001: The U.S. begins strikes in Afghanistan.
  • Autumn 2002: George Bush is mocked and ridiculed for suggesting that democracy could be planted in the heart of the Middle East.
  • March 20, 2003: The U.S. and its allies begin the invasion of Iraq.
  • November 23, 2003: The Rose Revolution in Georgia forces President Shevardnadze to resign.
  • October 9, 2004: Afghanistan holds its first post-Taliban elections
  • January 20, 2005: Iraq holds its first post-Hussein elections.
  • January 23, 2005: The Orange Revolution leads to free and fair elections in Ukraine, elevating Yushchenko to office.
  • February 2005: The first local elections since the 1960's are held in Saudi Arabia.
  • April 4, 2005: The Tulip Revolution in Kyrgyzstan forces the corrupt Prime Minister to resign.
  • April 27, 2005: Syrian troops withdraw from Lebanon and the pro-Syrian government resigns, concluding the Cedar Revolution.
  • May 17, 2005: Women in Kuwait are given the right to vote for the first time.
  • May 2005: The Egyptian constitution is amended to allow for the popular election of the President every 6 years.
Those were heady times, and they appear all the more remarkable now that we have five more years of historical perspective within which to frame them, because freedom has been on the retreat lately.
  • June 2008: B. Hussein Obama wins the Democratic nomination, and promises to "restore our image" around the world, which is another way of saying that he wants to be more friendly with our enemies, and that he opposes military actions that are aimed at replacing dictatorships with democratic governments.
  • August 2008: Russia invades, occupies and annexes part of Georgia. No action is taken against Russia.
  • November 2008: Obama wins the Presidential election.
  • June 13, 2009: The first of many Iranian election protests begins, and although they continue off and on for many months in the face of torture and deaths at the hands of the government, neither the U.S. nor any other country offers any substantial help.
  • September 17, 2009: On the 70th anniversary of the Russian invasion of Poland, Obama cancels plans to deploy a missile shield in Poland and the Czech Republic.
  • November 8, 2009: Obama snubs the 20th anniversary celebrations of the fall of the Berlin Wall.
  • March 26, 2010: North Korea torpedoes a South Korean ship, killing 46.
Add to this the impending bankruptcy of the Western Powers and the increasing degree of cooperation between new and old enemies like Venezuela, Iran, North Korea, and Russia, and I fear that all of the revolutions of 2004-2005 could be reversed - and then some.

Friday, June 04, 2010

On the edge

The S&P 500 index has broken through the latest ascending bottom trend line, but not decisively.

Sentiment has become a little less pessimistic over the last week or two, which leaves more room for prices to fall, particularly if there's a slow decline from here that doesn't raise the panic level too quickly. (Sentiment is a contrary indicator: optimistic markets fall more readily than pessimistic ones.)

Tuesday, June 01, 2010

Hindsight Humor

Courtesy of the Teleprompter of the United States:

Context for future readers: the wars in Iraq and Afghanistan continue; Gitmo is still open; the unemployment rate has risen to 10%; the 2000-page health care bill that nobody read is going to raise medical expenses and bankrupt our health-care insurance companies; and the Gulf of Mexico is filling with oil.