Thursday Outlook: New Lows?

by: David Fry November 12, 2008 | about stocks: GCC / GLD / IEF / IWM / JJC / MDY / QQQQ / SPY / UDN / USO / UUP / XLF    
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Big Wednesday again? Heck yeah! I may as well go with this video today for the image. Only the best can ride waves like this guy and it segues fittingly to today's market environment. And, no, even in my youth I couldn’t do it despite many years in Hawaii. So I’m just sitting on the beach waiting for waves my size.

One observation I’d make is I’ve never seen weekly and monthly RSIs [Relative Strength Index] with readings this consistently low. This is how extremely oversold conditions are. We are witnessing history in my opinion.

Conventional wisdom, better known as hope, argues that markets are just retesting their lows. One more day like this and we’ll be there. A failure to hold those and we could experience a sharp waterfall leg lower. That’s scary.

Volume is still relatively modest but breadth is horrible. The new lows just keep building.
























I’m not going to post all the sector charts today. We’re looking at the same thing from chart to chart.


















StockCharts is having more issues today since many ETFs have moved from the NYSE/AMEX to ARCA. They don’t have today’s data and won’t until tomorrow. Therefore I obviously can’t highlight those. But, as I’ve indicated the picture is the same from market to market and sector to sector.

It is said hedge funds saw $100 billion in redemptions last month. That goes with probably the same amount for mutual funds as investors scamper to the sidelines to protect whatever they have left. Private money managers and investment advisors are feeling the heat as well with clients demanding answers that are difficult to provide.

I’m sad for the many investors who are literally in shock at what has become of their savings and equity in property. Investment advisors are also in shock as their business models and clients have been victimized by the Black Swan.

I’m as greedy as the next person and want to be a participant now. But, risk management for a diverse set of subscribers, who for the most part aren’t gun slingers, is as important as performance. So while we’ve made a little money in 2008, we’re on the beach just waiting our turn for conditions that better suit our skills. It will come no matter the direction.

Have a pleasant evening.

Disclaimer: The ETF Digest has no positions in any highlighted securities.

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This article has 8 comments:

  •  
    Nov 13 12:43 AM
    I admit that I don't even know how to read those charts. But my sense is that this isn't about retesting lows. This is about fund liquidation. Prices may drop quite a bit as Nov 15 approaches, and may spark a panic. But I see things looking up after Thanksgiving and through December, after the hedge fund redemption period has passed, and hedge funds start buying back all the stocks they've been converting to cash.
    Reply | Link to Comment
  •  
    Nov 13 01:28 AM
    Looks bleak.....

    the USD chart is really sad.. amazing to think that it was at 120 in 2001....
    Reply | Link to Comment
  •  
    Nov 13 02:24 AM
    Uh Dave, you had better grab your arm-floaties... equities will sink straight to hell.
    Reply | Link to Comment
  •  
    Nov 13 03:40 AM
    Good review. Agree with David this is no time to be fooling around unless you have that special skill to trade the market up and down. Still a high risk market, with possibly another down leg to Dow 7k.
    Reply | Link to Comment
  •  
    Nov 13 05:52 AM
    The stock markets look indeed a little bit bleak, but if the Treasury starts unloading all her new needed debt to pay for TARP & stuff like that, the bond markets will get hit after hit too.

    And as far as house prices are concerned: We are not even halfway the decline because the year on year speed in the price decline is still accelerating...

    Bottom testing? If so these are only temporary bottoms.
    Reply | Link to Comment
  •  
    Nov 13 07:12 AM
    If the past is any indication, the hedge funds and mutual funds have done most of their dumping already this week. They usually try to avoid a very last minute deluge. If the economic news is at least decent in the next couple of days, the markets should rally off of the previous lows. Let's keep our fingers crossed. Then next week a real rally could start that would take stocks firmly upward. There was good news already today from WalMart as they beat slightly. They would have done better without the rise in the U.S. Dollar. Still they did well. They are predicting a few problems in Q4, but the future still looks good. This is good news indeed for the markets. URBN did well too. This should help buoy things in the short term. We'll wait to see the Trade Deficit numbers, but I am expecting them to be decent with the decline in oil prices.
    Reply | Link to Comment
  •  
    Nov 13 08:50 AM
    Your comment about government employees being the only ones who can retire is total BS. I am a federal employee, and my retirement is a 401K in the market, and social security. Has been that way since 1984. Get some facts.



    Reply | Link to Comment
  •  
    Nov 13 09:57 AM
    David,
    Thank you for your articles! You are the only author on my Seeking Alpha watch list.
    Reply | Link to Comment
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