The old adage is: "The market never looks across the valley."
The bear market underway is in the process of trying to
assess how deep the economic valley will be and also how wide.
Meanwhile, I am experiencing personal alarm bells. First, I
am spending a much larger than normal amount of time trying
to break down the uncertainty in the outlook. Secondly, I am
pushing numbers and find myself gilding the lillies, another
bad sign. All of this tells me that if I catch the bottom, it
will be a miraculous event.
My leading economic indicators have pitched downward, signaling
a downturn in the near term. My inflation thrust indicator is
still accelerating on a yr/yr basis. Liquidity measures are
tight. longer term economic indicators are improving but still
have a negative bias. My SP500 Market Tracker still stands at
1340 - 1360 fair value and implies that The Market's earnings
expectations for 2008 are quite subdued and that a quick and
positive turnaround in earnings is not expected now.
The monster oversold I discussed through much of January was
largely eradicated by last week's bumptious rally. This week's
downdraft is a bear market move -- sell the rally -- and it
leaves the market heading into moderate oversold territory.
Could the market slip down to the 1260 - 1270 low test zone
for a temperature check? Sure could. In the meantime, since I
remain comfortable that the market's fate may not clarify until
the end of March, I am going to try and not be too fidgety.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!