Friday, December 26, 2008

Back to Normal

No, not the stock market although by every measure I use it is indeed calming. What is back to normal - if such a thing exists - are prices of the things I use. Gasoline on Long Island, where I live, is supposed to be the highest in the country yet a gallon of regular is $1.83 at the local Hess station. Bagels are back to 90 cents from a buck, which does not sound big but percentage-wise it is nice.

Pizza seems to be clinging on to its increased price levels but everyone, from the landscaper to the water delivery truck, has dropped those fuel surcharges. How 'bout it, airlines? You can drop the baggage fees now.

A talking head said that since the peak there has been a trillion dollar tax cut on the public in the form of reduced gasoline prices. A bit dramatic since that "tax" did not even cover the entire year. I view things as having a new tax repealed rather than a real cut and in that cynical light there is no net advantage to the consumer.

So, are we ready to rally? I think it is rather widely known that I am looking for a multi-week move higher to the neighborhood of Dow 10K. Most blog readers come here via Barron's so you've seen the column but if you haven't read it please take a visit - it's free, by the way.

But after that, I see it coming back down - but in a more normal way. A declining market, not a crash. A Vix in the 30s, not the 80s. A couple hundred new 52-week lows, not fully half the exchange. You get the point - weaker bearish internals.

That's it for this holiday week. It's time to go over the river and through the wood to Grandma's house. Next year in Aruba (please).


Paul O'Cuana said...

I'm an avid follower of Investors' Intelligence sentiment survey but I only find it very helpful at extremes of market bearishness. Something curious happened this week. The number of bulls increased from 26.9 to 35.1 and the number of bears decreased from 47.3 to 38.3. Those numbers are fairly normal in times of rising prices, the thing is these numbers were recorded by Mr. Burke on Tuesday after the fifth straight down day for the Dow.

Patrick said...

I just wanted to say I enjoy your material on Barron's and your blog.

I have thought the same for the market, not sure about DOW 10k but from weekly and daily charts, plus add to it Obama will publish a stimulus plan I think we will see some upside.

Patrick said...

Just a follow up.

I have been following the 4% model on the Value Line index and it issue a buy a couple of weeks ago. Also real-wages turning up year over year shows that the working class has a little more cash in their pockets than last year.

Michael Kahn said...

I've never done or seen any work on the rate of change in sentiment numbers. For example, does a large percent increase in bulls from low levels mean anything? How about from high levels? I'd vote for the latter being significant.

(talking about levels of bulls, not the market).

Michael Kahn said...

Thanks for the kudos, Patrick.

As for the Barron's panel of experts, don't shoot the messenger. Shoot the analysts in the article.

And I see someone quoted my own Barron's Online article from April calling for a bottom in November. Not so terrible :-)