Monday, December 15, 2008

Stock Market -- Position Overview

Our recent newsletter, dated November 13th, stated that the US economy could get a modest boost from Obama's proposed $175 billion economic stimulus plan to rebuild infrastructure and help municipal governments avoid budget cuts, but the questions still remains if the effort will create overall long-term economic growth. We further anticipated that the DOW would remain within a large elevated trading range during the month, between 8,000 and 10,850, as the major stock indices consolidate before resuming the primary bearish stock market downtrend. The actual result saw the DOW continue the downtrend further before entering the period of consolidation, producing a trading range for the month between 7,449 and 9,653.

We projected that the US dollar would remain the preferred global currency of choice, as economies slow all over the globe and various central banks cut their key lending rate, but was overbought and due for a period of consolidation. We anticipated that the US dollar would have a euro fx equivalent trading range for the month between $1.24 and $1.32. The actual result saw the US dollar decline during this period of consolidation, producing a euro fx equivalent trading range for the month between $1.2436 and $1.3072.

We stated that the Federal Reserve and the US Treasury are in a kitchen-sink mode -- anything is getting tossed at the crisis, whether or not it make economic sense. This type of government effort was projected to place additional price pressure on the various US treasuries, during the course of the month, and anticipated the US 10-year Note would have a peak yield of 3.70%. The actual result saw all corporate bonds remain under tremendous price pressure, while the US treasuries were the safe heaven of choice. The US 10-year Note had a yield range for the month between 2.92% and 3.91%.