How in the world can it be a struggle to make cuts in a $900billion dollar package!
I felt sorry for President Obama this evening when I watched him on TV trying to defend this undefendable package. President Obama does have a mandate, he has unified the country in a way that no one since Ronald Regan has managed to do, and we should all, Democrats and Republicans, be thankful for the OPPORTUNITY that this presents.
On the other hand, I think all of us, Democrats and Republicans alike should be furious at our congress. These are the only people in Washington who managed to make former President Bush look popular, and I fear that they are going to drag President Obama down with them. The polls are already starting to show his numbers fall as he becomes more and more attached to this spending package.
We Americanâs have been told since October now that we face the worst crisis since the Depression, and that action must be taken yesterday. Since everything has been rushed through we have acted quickly and allowed our leadership to spend our money in questionable (at best) ways, with nothing to show for it. Now, Congress and the very liberal wing of the Democratic party see a âgolden opportunityâ to push through pet projects that would not otherwise EVER be able to pass. This bill is loaded with trash and his own party is taking advantage of President Obama in a very bad way.
I think something does need to be done, but not what is now being done. When I was a little kid and I was messing up and not making any progress my dad used to always tell me to slow down, just stop and think about this. Why canât we just stop and think about this whole thing? I know that the world is âdifferent nowâ and that this particular crisis demands quick action. Fine, but it should also require some well thought out action. That doesnât mean we have to take a year to decide something, but just as stupid as taking a year is doing it in a day. This is a TRILLION DOLLARS that my kids and grandkids will be paying for, yours too. We need to seriously consider the spending before we commit too it.
So now that I have that little bit out of my system.
Stocks rallied on heavier volume Thursday on hopes of that Market to Market accounting rules will be changed. The NASDAQ was up just over 2%, gaining 31 points and closing at 1546. The Dow gained 106 points, closing at 8063, while the more broadly based S&P500 index gained 13 ½ points, closing at 846. As mentioned earlier volume was higher across the board, and advancing issues led decline issues by about 3 to 1 on both exchanges.
Technically speaking today marks an âaccumulation dayâ in the market, and so far this week the market has traded higher each day on itâs close then it was on itâs open, generally a sign of strength.
Where do we go from here? As I mentioned at the start of the week we had declined to the bottom of a trading range. In fact, while everyone else was getting ready to jump off roof tops and proclaim the start of a new bear market I advised buying the NASDAQ 100 Trust (QQQQ) when it was trading at $28.50, its now about $2.00 higher. A seven percent move in four dayâs isnât too bad considering that most portfolioâs are down about 10% already this year!
Of course Iâve had some losers too, and some things that just did not do anything at all. The most important thing though is that you get rid of your winners quickly and you let your profitable trades make you some money. At this point we are nearing the top of the trading range the market has been in for the last 16 weeks. Of course as we do this others are becoming wildly bullish, you should not. Ranges tend to trade from highs to lows and then from lows back to highs again. Until this pattern breaks, you should not trade as though we are in a trend. Only during a trend do you favor buying near the tops of ranges. That is a breakout tactic, and it works very well in strong markets, but in a range bound market itâs a quick ticket to the poor house.
On the chance that the market does decide to break higher though you should always have a list of top performing names to buy. Today I bought a small amount of American Italian Pasta (AICP) for example. This is a great example of a stock which conforms to a lot of the criteria William OâNeil teaches in his Canslim method. Earnings Growth has been well above 100% each of the last three quarters, while Revenue Growth has also been respectable, over 40% in each of the last three quarters. The company has a reasonable Return on Equity of 10%. There are negatives though, and thatâs why this will not be considered for any sort of long term hold. The negatives include a high Price to Earnings Ratio, way more institutional ownership then I like to see, low management ownership levels and high debt ratioâs. Again, this will NOT be something I look to put into a long term portfolio by any means, but it has shown some great relative strength versus the overall market, and acted well on good news today as well. Recent numbers and trading patterns in this stock are similar to past winners.
As I look at this market I hope that this rally can hold. Iâm not any different then anyone else in that I want to see a strong America and a strong market. Thatâs good for all of us, and the fact is that itâs easier for me to make a lot of money if the market goes up. That said, Iâm not sure this particular rally has what it takes. We have very narrow leadership. Stocks like AIPC, profitable though it might be, are not the types of stocks that great bull markets are built upon. We do not have any sectors or groups of stocks outside of education really showing any solid bull market traits. On the flip side we have a lot of weakness and fear.
For this reason I will be closing out the last of the QQQQ long trade from earlier this week and Iâll also be very cautious.
Brandon
