Thursday, November 13, 2008

Stock Market -- Position Overview

Our previous newsletter, dated October 15th, stated that the deleveraging of the financial system is expected to continue for years, and new policy measures will slowly unclog the credit markets a bit. However, this just takes us to a consumer led economic slowdown and weak consumer spending, which appears to be taking hold this quarter for the first time in 17 years. We further stated that this would keep the major stock indices under pressure for the long-term and projected large DOW trading range for the month between 7,800 and 11,200. The actual result saw the DOW indeed remain under pressure, with a trading range for the month between 7,880 and 10,882 -- a very accurate forecast.

We stated that the US treasuries could decline in price during the course of the month, as the various US bailout programs increase the supply of the issued treasury instruments to raise the needed cash for the various rescue plans, resulting in a low yield for the US 10-year Note at 3.75%. The actual result saw the US treasuries remain under price pressure, causing yields to rise, and produced a US 10-year Note yield range for the month between 3.53% and 4.64% -- a very accurate forecast.

We anticipated that the US dollar may be close to a peak in price, due for a period of consolidation, and projected a euro fx equivalent trading range for the month between $1.32 and $1.41. The actual result saw the US dollar continue to rally in price, as it remained the favored currency with the global economies slowing, producing a euro fx equivalent trading range between $1.2523 and $1.4108 -- a fairly accurate forecast.