Dow Industrials, Week of October 27-31

S&P500, Week of October 27-31

11%  Hey, that’s normally a pretty good year. Pretty solid week, with broad gains across all of the indices, mostly due to the big day we saw on Tuesday. But Thursday and Friday both saw upside action, too.

All told, a pretty wild, positive week.

What does this mean going forward? Is the bottom in?

What say ye?

Category: Markets, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

45 Responses to “Markets Gain 11% on the Week”

  1. patient renter says:

    Is the bottom in?

    With so much bad news yet to come, how could it be?

  2. jason says:

    I don’t think so… Monday will be a bloodbath, didn’t you get the memo that Halloween is running a few days behind schedule this year.

    The Wall Street Slasher

  3. Mannwich says:

    Tough one for me. I’m still very bearish mid and long term but short term, who the heck knows which way this market will go? I just can’t see how the pain can be over this quickly without at least one or two more serious falls but I can see the market slowly creeping up (probably on light volume) in the near term as the credit markets improve. I think the shorts are just waiting for that to happen before the pounce. I could also see the markets tanking as early as next week.

    I have to stick with this outlook for now. The last time I went against my better judgment last October, I missed out on a great shorting opportunity. Although I did get about half short by early this year.

  4. dead_hobo says:

    Happy about the week. I made a few bucks and plan to buy when the next dip arrives. Happy days are here again, but beware the coming 10% dip next week or the week after

    The new site looks good.

    The registration needs work. I misspelled my first email address and it wouldn’t let me use ‘dead hobo’ again. I had to hyphenate it. Then wordpress issued this god awful incomprehensible password that I won’t even try to remember. On a brighter side, I did find the initiative to open up an anonymous mailbox on live.com. God only knows when I’ll sign in again. It’s too much work now.

  5. RangerTurtle says:

    Hedge funds haven’t finished cashing out.
    Yet to borrow the needed $3T in Treasuries.
    Shipping L/C’s still jammed (Baltic Dry).
    Consumers have stopped buying goods and services, so the equities are overvalued.
    Banks still aren’t lending (but are paying bonuses and buying other banks with TARP$).
    The dollar bubble hasn’t burst yet.
    Main street and Wall Street are still in major debt.

    Those are a few reasons that I think a bottom isn’t in!

  6. rue morgue says:

    this is the 20-25% pop we see before the fall. we’ve got (hopefully) another 15% on the plus side, then reality sets in. we will retest new lows when 4q/1q 09 numbers come in. keep yr powder dry.

    also barry site looks great. very clean.

  7. Carlos says:

    Don’t think the “bottom” is in…I’m expecting “Holy Sh!t” type numbers for the next two employment reports…People are not spending…Remember if you think your poorer, you are poorer…And most people right now are poorer, either by unemployment, 401k losses, home values, Credit card companies cutting credit limits, etc…

    The Christmas has been canceled memo will be circulated shortly…Merry Christmas!!!

  8. Winston Munn says:

    Is the bottom in? Sure. Sure. Absolutely. I’m so convinced I’m going to let you have these equities today at half-price, before they skyrocket in value. Ten will get you twenty, twenty will get you forty. It’s the American Way. Who’s first. Step right up….

    From the little-publicized headline department. From:

    News Republic: “Palin Threatens To Remain On National Stage After Elections – Republican Party In Panic Mode”

    Rutters: “Thirty-seven Million U.S. Ex-Shoppers Now Suffering Drop Syndrome”

  9. D.H. says:

    Barry,

    You need to cut the header graphic in half. It looks slick, but we come here for the content and it’s a pain to always scroll down just to read the beginning of your post. This post in particular has one and a half graphs viewable when the page loads.

    Remember, the look only matters during the first visit. After that, it’s all about being able to consume the content as quickly as possible. Otherwise, might as well just RSS …

    Just want to be honest.

    Keep up the great work!

  10. thatsabet says:

    Look thru these headlines…This IS the major difference between a financial event and an ECONOMIC event. Should this spill over continue it would seem hard to escape without considerable headwinds.

    http://globaleconomicanalysis.blogspot.com/

    The reality…seeing that all currencies are suspect and at this point is understood…HOW can fiscal discipline be set by currency values? Answer? It cant…the venting is going to most likely take place in the GOVT bond markets adjusting ylds to reflect margins of safety. Should US rates take out these levels (TYX on http://www.bigcharts.com) we will have to adjust to several “new” variables. Whether current valuations have already taken these events into acct will only be known in hindsight.

    All that said, U can control the level of the USD or hte level of rates…NOT BOTH. I find it hard to believe that the world will be “fooled” by the past tricks of the reflation trade. Should the mkts go higher I would assume the leaders will remain the same. OIH MOO PHO and other Marshall Plan type names. Plan for more excitement.

  11. Concerned American says:

    The bottom won’t be in until the job engine is cranked back up. McCain doesn’t get that at all. Barak claims to get it.

    It seems from the reports we haven’t even began to see the end of the layoffs. This may only be the beginning.

    Unless Barak has a great idea and outstanding leadership (I am assuming he wins) we may have to wait until our labor rates are less than the rest of the world. I pray for Barak,

    If McCain somehow wins, the only possible way out is kill the rest of the world and take all their stuff. He doesn’t seem to have a business mind at all.

    I am a former life long Republican if you are wondering. Voted for Ron Paul already. So no I don’t support either of the supposed choices.

  12. krbecarson says:

    i started adding to my Dow short position today. First time since the ye olde financial short selling ban rally.

    I sold down the homebuilders much in the same fashion. After a good leg down, you look from 1-3 short rallies before the next leg begins. I think we have at least another 12-16 months of selling before this is over.

    The same stuff I heard about homebuilders a year ago, I’m hearing now concerning the broader market. Lots of chattering about “valuations” and “book value” and “low multiples” bullshat.

    Btw, If anyone is looking for a great short selling book, check out William O’Neil “How to Make Money Selling Stocks Short.” It’s pretty technical, but really helps build your confidence. It’s very mentally tough to go against the crowd, especially when the crowd starts losing.

  13. batmando says:

    For want of a thread more germane, I post the following here:

    I literally live right across the railroad tracks (well, nowadays a rails-to-trails bikepath) from the likely, next U. S. Representative from my district, who has never held an elective office before and as an attorney may very well have little grounding in economics or markets, academic or practical. I’m thinking, gee, just how prepared will she be for evaluating the complexities of the current financial crisis and any legislation she’ll be called upon to consider when the next Congress convenes. Does the CBO provide primers to new Representatives to get them up to speed? If so, is the info comprehensive? Fair and balanced, conveying the breadth of the economics spectrum and options?

    So, I says to myself, what if Barry could have her ear (or eyes) for 5 minutes or even 15 or 30? What would Barry say or write? How would he summarize what’s gone before and evaluate the options that should be put before the next Congress?

    What if Barry wrote something short and pithy? What if Barry could get a few of his fishing buddies each to write their own précis of where the government should go from here, how and why? You know, maybe Roubini, Krugman, Kotok, Mish, Kedroskey, (name your favorite hobby horse rider), each could pitch in, boil it down to a page or two each.

    If I had a resource like that in my hand, I’d walk across the tracks, past the fish pond and up to the big post-bellum mansion (it used to be a summer meeting place for the GOP high muckety-mucks, as I understand the history), knock on the door and say, “Here, this might help!”

    Anybody else live next door to somebody who is “somebody” or knows “somebody” who might benefit from a little chap book like this?

    Waddya say, Barry? At least as good as pissing into the wind, right?

  14. krbecarson says:

    btw, LOVE the new site! but what happened to essays & effluvia??

  15. guru says:

    rue morgue has it right. We’re up 16% from the intra-day low on 10/27 to today’s intr-day high. The rebound from the Tech Bubble Crash was 24.5%. When you draw two trendlines, one at the bottoms and one across from that rebound high, you’re looking at only around a 1020 peak to this recovery move. I’m betting on a retreat from there back down after the Election to test whether that bottom holds. If you missed this 16% move you’ll have another chance soon.

  16. urbandigs says:

    I know Im early and this rally will last, but I sold 75% of my longs from 8300-8400 levels and started opening up some shorts:

    EEV
    SDS
    SKF

    Problem is, when the market decides to fall again, you wont get a chance to get short because it will be too late. Anyway, Im betting on tons of more securities yet to be downgraded (alt-a, prime, etc..) that will cause a new round of liquidations to raise capital. Maybe the 125Bln could cushion this, maybe not. Maybe the TARP will be the place to offload these assets at better marks, maybe not.

    However, with 300Bln already spoken for, seriously, how much will the remaining 400Bln save us? You know there will be another rescue fund needed! And who is going to save GM, F?

    Lastly, outside of JPM/BAC/WFC (the new world megabanks), financials have not really participated in this rally. I mean markets up 11% for week, and GS down $5? Citi still at 13.65, you know something is coming for them. But, who knows. Im sure rally still has legs for a bit longer.

  17. Granted I got burned a bit a couple weeks ago, but barring meltdown of Mad Max proportions, I’m still thinking that high Quick, cashflow positive companies with cash on hand will still be good to have…

    Fingers x’d, and happy Halloween!

  18. yoganmahew says:

    What does anyone else feel about he idea that it is mutual fund rebalancing that has caused the spike over the week? We’ve seen the same spike in Europe (particularly in Ireland). I can say with some confidence that the economy over here hasn’t been sprinkled with magic pixie dust and that the PMI numbers are dreadful!

  19. yoganmahew says:

    PS is anyone else intimidated when they log in that they’ve got 127,000 comments waiting for their attention?

  20. fubsy_cooter says:

    I’m pryaing for the S&P to hit 1100 so I can begin intiating short positions that I will ride back down to the 500 to 650 level. I also hope the bull/bear readings/vix get decidedly bullish. Don;t get me wrong, I don;t hope for the downfall of our economy, that is something that was created by our leaders. I will, however take advantage of it so I don’t go down with em. as always I set stops so if I am wrong I will not be destroyed, which I reserve the right to do half the time.

    Fubsy

  21. jason says:

    @yoganmahew:

    This exactly what I feel is happening and why I fear Monday will be ugly.

  22. karl k says:

    Right now it appears that fundamentals — macro and micro — will be driving the markets. Since the net exposure on LEH CDS was just $6 billion, how bad could the rest of that be? GM anyone?

    And having housing values reached the trough now? It would seem so, or certainly not have much further to fall.

    I agree with the earlier poster that earnings are now key. The question is, which earnings level has been priced in? An 8% unemployment 3 quarter negative growth? Or a 10% unemployment 6 quarter negative growth?

    I think the market has priced in the former. If the latter occurs, we’re headed to 7000 and 725.

  23. mlomker says:

    I was long during the run up and I’ve been short since. That’s obviously been a little painful but not as much as you’d think–since the big day the market has basically ran up during the day and liquidated at the end. It really hasn’t made all that much progress…plenty of opportunities for those of you that have a shorter trading horizen than I have (a few days).

  24. DP says:

    I noticed today that QID was up at the same time all the major indices were up, is that normal? Around 3pm it was up around 1% when the Nasdaq was also up around 1% which made me think a run down was coming, and sure enough, it did (but didn’t hold). Seems if I were a big fund about to dump I’d buy myself some QID first. Realistic? Seeing patterns that aren’t there?

    Also noticed AMZN really struggled the past couple of days while everything else was rallying. It hit 43 after lower guidance, ran up to 57 then just couldn’t get any higher while everything else continued making gains. Looking like a good put candidate, although the puts on it are expensive as hell and depending how monday goes, may also be too late. Any thoughts?

    As for the bottom? Not a chance. This week alone 4 of my friends (different companies) have been laid off. None of those companies have a job reduction announcement out — yet. I’m not including the other 2 who work for private companies.

  25. matt says:

    Do you think the bottom is in when we get a 10 percent up day? No. That only happens when markets are unhealthy. The dollar and the Dow will turn down by EOY.

  26. gabriel says:

    @dp

    No, it’s not normal to see QID and QQQQ moving in the same direction (obviously), but that is the problem with leveraged funds. They get out of whack every so often. I’ve seen this on SSO and SPY as well. They do get fixed eventually, every other day or so, but the correlation is hardly ever super perfect.

  27. Eclectic says:

    Charlie Minter over at Comstock has a pretty logical view:

    http://www.comstockfunds.com/index.cfm?act=Newsletter.cfm&category=Market%20Commentary&newsletterid=1416&menugroup=Home

    I can’t think of a more reasonable presentation of the relative value of the market, particularly in the manner he smooths earnings to trendline of about $70. He expects the trough to eventually show us a PE of 10, and thus an S/P of something like 700 or lower.

  28. gabriel says:

    @BR

    Barry, nice site, but here are two more suggestions:

    1. Ask your techs to put your favicon graphic on the site as well.
    2. Now that you’re using wordpress, you can use the wp-chunk addin that can neatly shorten the display part of a long url, such as the one in a comment above.

    Thanks for the great info, as always!

  29. Winston Munn says:

    I do not believe it possible to escape with such a quick and relatively pain-free recovery after the forced disolvement of our 25-year marriage to profligacy. The sensation stirring the present rally is one of relief – relief that the financial world did not collapse and that the U.S. was not plunged into another Great Depression.

    I am not so certain that we are not simply being lulled into a false sense of salvation. The L-shaped recession is still a valid risk.

    Credit card defaults are rising. Commercial real estate will begin to faulter over the next few quarters. Consumers have only started to retrench. FCBs have started to dump their holdings in Fannie and Freddie paper, causing enormous pressure on those spreads and on mortgage rates. The Treasury supply needs have not been rectified and look as if additional increases may be needed. We are still relying on borrowed money to support that supply – if the demand for treasuries begins to sharply diminish along with the demand for Fannie and Freddie paper, it would cause a virtual collapse of the U.S. economy and the government’s ability to function.

    I think in one respect Greenspan got it right when he called this crisis a tsunami – a tsunami does not end with one gigantic wave crashing ashore – a tsunami come in sets of waves, one building on the residue of the last until everything in its path had been laid waste.

    This rising tide not only lifts all boats, but afterwards, as it recedes, sucks all boats, beach houses, and swimmers back into the sea and drowns them.

    I wouldn’t wade too deep just yet into this rising tide without a raft and life perserver nearby.

  30. Steve Barry says:

    I posted months ago that if Obama wins, Bush and Co. will want to really stick it to him…they will turn off the spin machine and the PPT. That will really stick Obama with a mess.

  31. Steve Barry says:

    Barry, you said the blog would load much faster…on mine, I seem to have to wait for those 16 graphic squares to fade in and it takes awhile.

  32. sheople says:

    I’m in agreement with the Concerned American. Things started spiraling when our manufacturing was shipped to other countries. Until we get those jobs back, our country will not get back on track. I’m thinking that tax “rebates”, bailouts, nationalizing our businesses, and Ben & his chopper spreading money in the stock market is not going to be the answer. So much for our Constitution. I don’t believe I will live to see things “back on track”. What are we leaving for our children and grandchildren?

  33. Steve Barry says:

    Nouriel on CNBC saying he predicted 500 hedge funds will go bust and he was at a conference where someone predicted as many as 3000 will go bust. If that happens, market will overshoot to the downside and S&P could trade at 400.

  34. Steve Barry says:

    Nouriel is live on CNBC for the rest of the hour…of course they are calling him “Dr. Doom.” Real nitwits…they can’t imagine a bearish outcome.

  35. Mike in Nola says:

    Are all these new people? Saw hardly any names I knew as people worth listening to on this thread. Maybe it’s the Halloween effect and everyone is masquerading.

    Anyways, my 2 cents:

    Barry made a great call and those who poked fun at him should apologize.

    The does indeed appear to be the bear market rally we were expecting. No, those lows we saw a couple of weeks ago were not “the bottom,” only “a bottom.”

    Analogizing to 1929, this could be a 50% rally, although I doubt it.

    Based on the strength exhibited late today, I think we likely will see at least 10,000 on the DJI and quite possibly 11,000. Anyone who was looking saw some huge sell orders push the DJ down 200 points in the last 45 minutes. It soaked up the orders andrecovered nicely. How likely would that have been a couple of weeks ago? I think it also shows that the wholesale dumping is starting to be less prevalent, at least for the moment. Obviously, I don’t think it’s going straight up.

    I expect things will start hitting the fan after the bad holiday numbers start sinking in, but that still gives it six weeks to run.

  36. constantnormal says:

    Yeah, NORMALLY 11% is a decent year.

    Can I see a show of hands that thinks this is a normal year?

    Thought so.

    Only problem is, this year has been sufficiently perverse as to leave open the possibility of it ending either up 20% or down 40% … or any other randomly selected number.

    We have a potential election honeymoon of uncertain length, the possibility that the consumer will surprise everyone and obliterate their remaining credit during capitulation Thanksgiving sales by merchants, and even the exceedingly unlikely possibility that the new administration will roll out an outstandingly competent cabinet and a credible plan to pull the nation out of the fiscal crash dive it is currently in.

    There is also the possibility (probability) that the malls will be empty over the Thanksgiving weekend, that an increasing cascade of employers will announce a series of ever-larger layoffs, and that we will take some more turns around the deflationary whirlpool, with the economy shrinking more and more, until the national economic toilet is clogged with the turds of banks, insurers, and major corporations pumped so full of Fed hot air that they just won’t flush.

    Of course, the maximum perversity would be achieved by having the market do silly feints up and down from here, and close out the year with a nominal 11% gain.

  37. Andy Tabbo says:

    Very strange market action today. Had me a bit chopped up the last 60 minutes of trading. I thought we could see something closer to 1000 today….I guess others did as well….and we sort of fell apart into the close. As I’ve said several times on the other “market dynamics” blog entries….we’ll get another low this year. The fact that the market today was setting new high’s above 97o and it was just “grinding” above 970 was “telling.” In tells me there was definitely SELL volume on any perceived ‘breakout’…bulltrap?

    The 985 level is the exact midpoint of the 23.6/38.2% retrace of a larger Wave 3 on the model I’m going with…it’s an interesting level to reverse from and go much lower. However, of the ABC pattern that began on October 10th, I cannot see a clean ‘finishing’ pattern for the C leg. I would have loved for the SP500 to run to 1000 ish today….it would have been a clean pattern in my book and I could have sold the SP500 with reckless abandon….but the whole price action today was ‘odd’ for me. So, I will have to sit on the sidelines till the market tells me something new.

    On a psychological/sentiment note…there were plenty of ‘relieved’ happy looking people on CNBC today….and the VIX has come way off….bottom callers all around the place right now….my gut says sell the piss out of this thing next week…but my technical side says wait to see the action.

    Regards,

    AT

  38. krbecarson says:

    I hate those ultra-short Proshares. I bought a bunch a few months ago, but the action was way too wild and unpredictable. I sold them way too quick, but I’m just not a big fan of that kind of volatility. With the Proshares it feels like your trading the VIX more than the underlying securities.

  39. krbecarson says:

    The DOG shares have been great though! almost right on the money. very reliable.

  40. KJ Foehr says:

    THE bottom? Not likely:

    ***** added for emphasis

    US annualized econ growth rate at record low-ECRI
    Fri Oct 31, 2008 10:30am EDT

    NEW YORK, Oct 31 (Reuters) – A measure of future economic growth in the United States slid to a seven-year low and its annualized growth rate dived to its lowest reading on record in nearly 60 years of data, a research group said on Friday.
    The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index (WLI) fell to 112.9 in the week to Oct. 24 from 114.0 in the previous period.
    It now stands at its lowest level since Oct. 26, 2001, when it was 112.7.
    *****The index’s annualized growth rate dipped to negative 21.9 percent from minus 19.3 percent, its lowest going back to January 1949, when the index was first published, according to ECRI data.
    “With WLI growth plummeting to the lowest reading registered in its six-decade history, the outlook for the economy has darkened dramatically.” said Lakshman Achuthan, managing director at ECRI.*****

    http://www.reuters.com/article/marketsNews/idUSNAT00452820081031

  41. Mike in Nola says:

    krbecarson:

    SSO has tracked the SPX pretty well the last couple of days. Same for UWM.

    May be that the lower volatility is making tracking easier.

    And guys, remember that for all the claims that the Market reflects the economy, it doesn’t do so in a timely manner. We all (or almost all) knew that things were going down the toilet a long time before the market really tanked. So, just because things are bad and are going to get worse, that does not mean that the market will tank immediately. Joe Six Pack investor needs to figure it out first. That could take awhile if he’s as stupid as Palin thinks he is.

  42. Steve Barry says:

    Apparently, as seen on CNBC, Nouriel welcomes being called Dr. Doom and is , according to this NY Post article, a part guy.

    http://www.nypost.com/seven/10312008/news/regionalnews/dr__doom_does_dc_136165.htm

  43. Steve Barry says:

    That’s “party” guy…where is the old preview feature?

  44. We are too far from the end of the recession to be anywhere near a bottom.

    People that shouldn’t be in the market will have to sell until only people that can afford to be in the market are left.

  45. DL says:

    I’d like to see one more smackdown to S&P 850 before declaring that an intermediate term rally is likely.

    I’m thinking that the election results will offer the catalyst for that pullback.

    Also, Hank and Ben (and Bush) may decide that, with the election out of the way, they can actually go an entire month without a bailout or backstop.