Lots of reasons to doubt the economy, but let the market point the direction.

[jon]

Despite the modest low volume rise Monday, the indices are still setting up something of a handle to their short double bottom bases, trying to shake out the pessimists and then continue the move higher. The market complexion changed with the higher volume fight, rally and follow through. That has set the stage for a higher move, and now the market is taking its time, and attempting to set up the next break higher. In a rising market that is typically how it is done: a series of pauses followed by some quick moves higher. The action repeats as long as the price/volume action remains generally positive, i.e. higher on the upside and lower on the downside. So far it is doing that in the very recent history.



Now some will read this as a call for a continuing surging bull market. Well, there has not been a surging bull market since 2003. The market has risen since the end of 2003, but it has been mostly a walk laterally with the recent selling giving back nearly all of the late 2004 rally. Indeed without that post-election run the market has gone nowhere for a year and one-half.



We still have a lot of doubts about the ability of the economy to handle all being asked of it right now: ongoing armed conflicts that will likely grow in geography; rising demands from entitlements; lack of investment in by the US in the US; a Fed that is going to raise rates into rising oil prices just as it did in the 1970’s, and of course the higher oil prices themselves. Thus if the market does post a strong rally, that means that some seriously positive things about the economy. Thus far we have not seen a strong rally, just a recovery off of some harsh selling; there is a ways to go for this to be really strong. Again, the market has not been strong for a year and one-half.



Even with those doubts we still have to watch what the market does as the big money makes its moves. We are not going to change the market because we think the economy has big problems or is really strong; that is insignificant. What is important is what the big money is doing now. That is evidenced by the volume on the moves and what the leaders are doing. Right now there is some solid buying ongoing in the market and leaders are performing reasonably well. It still has to make the next move after this sidestep test, and there is serious resistance immediately overhead. Given the action, however, the market is telling us to watch for another break higher. We are not suggesting that this move is going to take it to new 2005 highs; we still think it will need a test of the recent low. Still, it is showing good action

[VJW]

Ah, the DJIA closed on November 7, 2000 (election day) at 10,952.18 and closed yesterday at 10,281.11. Adjusted for inflation, the DJIA is down thousands of points. I would agree that the market is INDEED pointing the direction of the economy.

[JLP]

Ah, the President didn't take office on November 7. The market was already falling WAY before Bush was even elected. It happened on clinton's watch. Why do you forget that?

[BillsGirl]

Originally Posted by JLP

Ah, the President didn't take office on November 7. The market was already falling WAY before Bush was even elected. It happened on clinton's watch. Why do you forget that?

wow it's amazing to see a smatr man in here, Anythinhg a president does take a good 2-4 years to affect the economy and things don't happen instantly once taken into action the effect take a while to build on!

[VJW]

Originally Posted by JLP

Ah, the President didn't take office on November 7.

Never claimed he did.

The market was already falling WAY before Bush was even elected.

But election day was when he impacted the economy and the markets.

It happened on clinton's watch. Why do you forget that?

Except the overall "market" rose spectacularly during Clinton's term, but nothing goes straight up.

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[VJW]

Originally Posted by BillsGirl

Anythinhg a president does take a good 2-4 years to affect the economy

Ah, no.

In 1992, Consumer Confidence had been declining most of the year, and was flat in October. It turned on a dime in the first week of November (which encompassed election day) and rose dramatically to the highest levels in history and stayed high for the next eight years.

In 2000, Consumer Confidence was still at historic highs in September, was flat in October, and crashed in the first week of November (which encompassed election day). November's drop was 10%, the LARGEST drop in a decade. In December, Consumer Confidence plummeted once again, by another 10%. There has never been a back to back monthly drop of those proportions since records were kept from WWII onward.

Consumer Confidence continued to drop in January, February, and March of 2001, and the national economy entered recession in March.

Keep in mind that Consumer Spending is 70% of the national economy.

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