I’ve been getting the hang of customizing and adding to chrisrowesblog.com and haven’t publicized a damn thing yet, partially because I want to be 100% sure I do no wrong by my paying members of Tycoon Services (can’t post what other people pay good money for – like recommendations), and partially because I’m just not sure exactly what I want it to be based on yet. Today I’ll discuss ways Obama can create an Obama stock market rally RIGHT NOW.
In the short term, we’re seeing weak volume rallies. Of course this last week was expected to have light volume due to Jewish holidays and since it was the first week after labor day. It looks more like traders covering shorts with no real conviction on the decision to move higher. It seems like with every real move higher in 2010, we’ve seen decreasing volume. We see heavy volume on the sells. But most recently we have seen lighter volume on both sides as the market just stalls. So the bias is to the downside but with the intermediate-term indecision, I’m reminded of whichever “Rocky” movie (was it part I or part II?), when both Rocky Balboa and Apollo Creed are so weak that they eventually both go down at the same time.
That’s the kind of action we generally see in a stock market index; in an individual stock; in just about any kind of security; right before we see volume pour back into the market either sending it much higher or lower with strong momentum. You can look at any long term stock chart of any real company and you’ll see what I mean. Both the bull and the bear have hit the proverbial canvas and it’s just a matter of which fighter can get up before the 10-count!
This action isn’t surprising in a mid-term year, typically the weakest year out of the 4-year presidential election cycle. Investors and traders hate uncertainty so it doesn’t want to do anything until investors get a better sense of how policies are likely to change (or not). If there is any direction in the market, it’s usually going to be to the downside. And for the same reason, the following year tends to be the strongest out of the 4-year cycle. Investors then have a better feel for what to expect for the next couple of years, at least, and the president spends nearly the next two years shining the positive light on all the good he’s done.
For the Obama administration, the market is WIDE OPEN to be manipulated in any direction they want! Of course they want it higher in order to increase positive sentiment which helps stimulate the economy.
Believe me, I am all for market manipulation by a president. We will know very soon if his administration understands technical analysis and how the market place works in terms of timing his announcements/decisions.
Money has been pouring out of equities and into bonds drying up the level of activity. But if Obama comes out and puts his “huevos” on the table and does something huge in terms of tax cuts, for example, and “surprises” everyone, money will likely come pouring back into the stock market pushing it back into bull mode. That may just be his plan! What’s the alternative? Whatever his next couple of moves are will tell how savvy he is in terms of market manipulation. If that is, in fact, his master plan then he had better make his play soon because markets won’t wait much longer.
I don’t understand why people tend to omit, from their arguments on tax cuts, what it just generally does to sentiment and momentum. Tax cuts may “cost” the country money, and whether you believe that the money directly gets plugged back into the retail stores, housing, construction, business investment, or not, you can’t argue with the fact that when people feel good, they spend. Period. If Joe Shmoe’s 401k is moving higher he’s more likely to spend. If dividend taxes don’t increase, my grandparents, who are living off of dividends, will be more willing to buy my son and daughter Christmas gifts. Getting on the same page as his new partners (the right) and improving bullish sentiment has intangible benefits that I’m hearing little discussion about and to me that’s going to be the whole ball game.
Obama knows he’ll have to work with what will soon be a Republican controlled House and maybe even Senate. He’s already moving more towards the center as his policies have so far been viewed by business owners as “antibusiness”. As Republicans gain some control of congress, the risk is that nothing will get done for the next two years. Right now he has the choice of striking while the iron is hot in the equity market (light volume, spring coiled, sitting duck waiting for something big to happen) by making more “business friendly” decisions, at the same time warming up to Republicans, giving the markets the sense that they will be able to play, at least somewhat, nicely together.
Again, the tax cuts are the example I’m using but if Obama has some other idea then he’d better go ahead and fire his bullet before the market fires it for him.
The long-term momentum is certainly down, based on the light volume rallies and heavy volume distribution days, so inaction is the same as consciously letting the equity market drop (which will further hurt consumer sentiment spiraling the economy lower with more disinflation and maybe even the other “d-word” that nobody likes talking about). The bear’s jugular is exposed right now Obama. What are you gonna do?
Related Articles
- Investors, Prepare For Volatility (nytimes.com)
- Stocks on the rise: A sucker’s rally? (money.cnn.com)
- Back to School for Investors (thestreet.com)
- Is the Bull Down for the Count, or Just Taking a Break? (dailyfinance.com)
Posted by Chris Rowe 
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