Saturday, October 4, 2008

Weekly Rewind - Week 40 (10/03/08)

(Click to Enlarge)

In law school, they would have said that the predominance of red on the table above "speaks for itself" -- res ipsa loquitur. No green on the screen, save some surprising US Dollar strength on relative weakness abroad (UUP +4.8%) as the S&P 500 (SPY) recorded a staggering -8.7% decline in extreme whippy trade.

In fact, the VIX options volatility index topped 48 on Monday, and remained in the 40's throughout the week (now +22.7% stretched above its 15-day moving average). However, between the Dollar strength and global weakness, Emerging Market (EEM) losses made the S&P's look mild, down -14.2%. Sectorwise, only Consumer Staples and Heathcare managed to once again remain on relative high ground, and that's not saying much (XLP -1.7%; XLV -3.9%).

Current Events & Weekend Reading:

Trading in Week 41 of 2008 will be influenced by on-going early Fed rate cut speculation in the context of the following economic calendar:

  • Tuesday - FOMC Minutes & Consumer Credit
  • Wednesday - Pending Home Sales & Crude Inventories
  • Thursday - Initial Claims & Wholesale Inventories
  • Friday - Trade Statistics

In the last decade, only two other weeks matched or exceeded this one in magnitude of loss for the S&P 500 (September '01 & April '00, both -10.2%). In each case, the following week the index saw gains of +5% or more. Going back further still, even the week following Black Monday in October of 1987 was mildly positive. (Though a couple near misses in March '01 & July '02 did continue lower.)

While this writer isn't convinced that "the" bottom is in ahead of the national elections and third quarter earnings, we are likely near one for the intermediate-term, and with so many sectors so very highly oversold along multiple time frames and the "bailout" ballyhoo behind us, I think (save the now necessary black swan caveat -- sorry!) we have good reason to believe that next week may provide the bulls welcome relief to the upside.

A glossary of Weekly Rewind terms and statistics has been posted here for your reference. Enjoy the weekend.

Never Investment Advice

1 comment:

Jeff Pietsch CFA, Esq said...

My, is that a flock of swans approaching!