A week or two ago I made some predictions about the markets and international stuff. Well, I want to revisit my prediction about the Dow and S&P going into the 6,000 and 600 territory. From Jeff Saut at RJFS, who is clearly beginning to see the ‘earnings collapse’ in the S&P and Dow:
For the record, the Dow’s December closing ”œlow” was 8149.09 and we will be watching the January Barometer, as well as the December Low Indicator, intently over the coming weeks. However, for the here and now we are watching the S&P 500 (SPX/890.35) as it rests marginally above its 50-day moving average (DMA) at 888.75. A decisive downside penetration of its 50-DMA would be a decided negative, causing us to reduce trading positions. A violation of the ”œMaginot Line” at 851 (please see chart on page 3), however, would prompt us to abandon all ”œlong” trading positions and once again look to hedge investment positions to the downside (thanks to minyanville.com and Jeff Cooper for the Maginot Line insight). While since the ”œpsychological low” of October 10th (839.80), and the ”œprice low” of November 20/21st (741.02), we have been suggesting that the upside should be favored into mid-January, we did not like last week’s action one bit. Moreover, up until last week the equity markets were turning a deaf ear to bad news; last week they started ”œlistening” to bad news. And that, ladies and gentlemen, is a distinct change from what we have been seeing for the past few months.
To be sure, the tone seemed to change last Wednesday when ADP Employer Services reported that 693,000 private sector jobs were lost in December. They also revised November’s job loss number upward to 476,000 from a loss of 250,000 jobs. Since we pay more attention to the direction of revisions than we do to the actual headline numbers, this revision was disturbing. Also disturbing that morning was Intel’s (INTC/$14.15/Strong Buy) shocking news of a 23% decline in 4Q08 revenues due to weak ”œend demand.” Both revelations cast a pall over ”œthe street of dreams,” and when banking analyst Meredith Whitney stated that the nation’s banking complex would need another $40 billion the rout was on, leaving the DJIA (8599.18) lower by 245 points. The Wednesday Wilt broke the senior index below a rising trendline that had been forming since late December, causing one Wall Street wag to exclaim, ”œUh oh!”
Uh oh is right. This is one prediction I would really love to be wrong about it. But I just don’t see how the Dow and S&P can trade sideways or up all year.
Oh, and Jeff ruefully adds:
”œIronically, some of the biggest losers from the Pelosi rules changes will be fiscally conservative Blue Dog Democrats. The ”˜pay-go’ rules they fought so hard for two years ago ”“ to require new spending proposals be balanced with additional revenue or cuts elsewhere ”“ have been gutted. And no term limits will mean they will have to stand in line for a taste of real power. ”˜All of those nice pro-life, gun-owning young Democrats recruited by Rahm Emanuel will never have any real influence now,’ says Grover Norquist.”
Anything Grover doesn’t like has to be good for the Republic!
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