Wednesday, January 9, 2008

Stock Market -- Position Overview

Our previous newsletter, dated December 12th, stated there were growing negative divergences that would seriously challenge the outlook for both the domestic and overseas markets. We further stated that the November correction in the major stock indices was the worst in five years, and that the bears are growing increasingly stronger and the bulls weaker, as we transition toward a prolonged bear market. We projected a DOW trading range for the month between 12,200 and 13,785. The actual result saw the DOW decline during the month, but not as much as forecasted, producing a narrower trading range, between 13,092 and 13,780.

The US dollar was anticipated to hold new-found support, with a euro fx equivalent trading range for the month between $1.43 and $1.48. This forecast proved to be very accurate, as foreigners supported the US dollar, resulting in an actual euro fx equivalent trading range for the month between $1.4336 and $1.4743.

The US treasuries were projected to be price-supported, since the US financial system will be first to break down, followed closely by the US consumer, leading to a peak yield for the US 10-year Note during the month at 4.17%. The actual result produced a larger yield-range than anticipated, as inflationary-concerned data released during the course of the month caused the US treasuries to both decline as well as rally in price, resulting a yield-range for the US 10-year Note between 3.90% and 4.29%.