stock market

For Active Traders, 2010 Can’t Come Soon Enough

According to a recent online survey of more than 270 retail investors conducted by online broker TradeKing, most investors are writing off hopes of a recovery this year and looking to 2010 for relief.

In the survey conducted during the last week in October 2009, 47 percent of investors described their market outlook as “neutral” or “not sure,” which are among the highest levels reported since the survey’s inception in July 2007. Accordingly, most of those surveyed maintain a skeptical view of the Obama administration’s handling of financial market matters, with more than 62 percent of respondents saying the administration’s policies either make them feel “less confident in the market” or had “no effect at all” on their market confidence, up two percentage points from last quarter.

“One thing is certain: uncertainty dominates right now,” said Don Montanaro, Chairman and CEO of TradeKing. “We see at TradeKing how investors’ bullishness comes in the form of very specific moment-in-time opportunities, but the overall sense is that the market could go either way on any given day until we see some solid trending data signaling long-term recovery.”

Unemployment Remains #1 Trade Trigger for Second Consecutive Quarter

U.S. Unemployment Claims held fast as the top trade trigger for both equities and options traders, with 41 percent of respondents pointing to this issue as their primary concern. U.S. Housing, Consumer Spending and Interest Rates all tied for second at 30 percent. These concerns knocked Quarterly Earnings from its #2 spot last quarter, falling sharply from 36 percent to 27 percent in this most recent survey.

Energy and Technology Sectors Have Moved Up Sharply As Top Long Opportunities for Equities and Options Traders

For the sixth straight quarter, Energy remained the favorite sector for both equities and options traders as having the greatest potential for success in a long position for the coming quarter, followed closely by Technology.

• 58 percent of total respondents selected Energy as their top long play in the coming quarter, up from 49 percent in July. It was followed by Technology at 47 percent, which rose from 34 percent just three months ago.

From a short position, Transportation and Travel took top spot for the second consecutive quarter, followed by Finance and Retail as the most promising short plays.

• Transportation and Travel was selected by 24 percent of the respondents for the top overall sector to short, up from 19 percent last quarter. Finance took second at 23 percent and Retail came in third at 21 percent.

stock market

Dow Wow!

The stock markets surged ahead again yesterday, ending at 9171. The last time it was that high was November 4, 2008. Know what day that was? Election Day, the day history was made in the US as the first African American President was elected. But we still have a ways to go to get back to the high of 14,078 on October 10, 2007. But we have also come back quite a bit from 6626, which the Dow hit on March 6, 2009. Know what that day was? Actually nothing special, just thought I’d get all conspiracy theory for no reason for a second. That was a bummer of a time (and eerie that there are three 6’s in that number). But since then the market is up 38%. But we have to do that percentage increase yet again to get back to the high. But never mind. We are on the way back. At least in the market.

But tell that to my friends in real estate. Or manufacturing. Or shipping. Or private academia. Or barber shops. Or theme parks. Or tourism. Got the idea? The whole economy is still hurting. It will continue to do so. But Wall Street, where I live as a securities lawyer, is indeed waking up. We are busier than we’ve been since probably last summer. This is a good thing. Let’s hope our historically elected President will take actions that will work to protect the coming growing economy both short and long term. We have not defeated the business cycle, and that’s a good thing. Go Dow go!

stock market

Is the Stock Market a Leading Indicator?

Most economists will tell you that one of the most looked to indicators of the future economy is the stock market. There are others like housing starts, inventories and bond yields. In the last 3 months all these indicators have been positive. That is the first time that happened since 2004. Hello? Is anyone noticing this stuff? Someone posted a comment on Marketwatch.com saying, “The 10 day pump in the market indices is as bogus as a $3 bill.” Forget the fact that earnings reports have been positive (especially Apple which astounded experts after the market closed today…let’s see what happens tomorrow) and some economists are actually beginning to say there are signs that we may have started the beginning of the end of the recession.

The market closed higher today than January 6. Will there be more dips in the market before it gets back to a high? Of course. Will they head us back down to the 6500 nadir reached in March? No clue, but everyone I talk to thinks not. Then again, those who can always predict the stock market correctly should be getting fanned on their own island, and they’re not.

It is true that the regular rules for when recession ends may not fully apply here. The downturn has so dramatically affected every single sector of the economy like none I’ve seen in the almost 30 years I’ve been in the market. But….it’s starting to get better in some sectors, less bad in others. The lagging indicators like unemployment will continue  to rise, as they will reflect what happened a few months ago.

If nothing else, a rising stock market makes people feel better, like they have more, even if just on paper, and that might trigger a little spending which will multiply and help the economy. Also as profits are taken people make actual real money, which is even better. I keep getting back to that old canard – expectations. When our expectations are that things will get better, that very feeling helps things actually get better. Probably your therapist will tell you that works in other places too. So yes, Virginia, I think the stock market is indeed a leading indicator now and is giving us a real signal that things will get better, hopefully sooner than later.

stock market

And the Economy….?

We have heard much from the President in recent days. About Michael Jackson (super talent who faced troubles in his personal life) to North Korea (very concerned) to Russia (give us some fly-overs and we’ll give you some stuff) to Iran (also very concerned but can’t “meddle” and still willing to have direct talks) to health care (still determined but beginning to realize it will be tough going in Congress).

But we’re not hearing as much about the economy, except comments from VP Biden essentially saying that they underestimated how bad the economy was. When did that take place? January 21? Last week? Who underestimated? The “experts”?  None of this is clear. It reminds me a little of Reagan Budget Director David Stockman’s famous comment about the budget process in his first year on the job, saying, “None of us really understands what’s going on with all these numbers.” And this gives them the ability to continue to blame things on the past administration.

We don’t go political here. But I have been consistent in my view that the stimulus package, less than 10% of which has been spent all these months after passage and with jobs numbers still horrible, was more for the benefit of the President’s social agenda than a true stimulus. Even staunch Obama supporter Colin Powell has begun to wonder if the President is simply trying to do too much too fast. And there is no appetite in Congress for another stimulus just for its own sake. I still believe Sen. McCain’s amendment to the stimulus would have made sense – as soon as the economy recovers, all future stimulus spending ends. Alas that was not approved.

So what’s the answer? Not easy. The Fed is out of tricks short of printing money, which is basically what they are doing. Obama can’t spend any more. They’ve shorn up the most struggling big companies by taking them over (but hopefully not for long). Hey, how about looking at taxes? Historically, tax cuts have almost always had a very positive effect on the economy. Sadly that will not happen. Thus, there simply ain’t much to do except cheerlead the old stimulus into working. At some point. And this is why we’re not hearing much from the President other than his being pleased when jobless numbers are not quite as horrible as the previous month. In the meantime the rest of us are waiting. And hoping.