Rothe Financial Group

Another Line In The Sand Moment

admin — Mon, 23 Aug 2010 16:07:58 +0000

Point and Figure Charts (PnF) help take out the daily “noise” of the stock market and allows us to see the great picture. The Dow is trying to reverse its summer downtrend and we may be starting to see investors come back to the market.

Congress is Out – Let’s Party!

admin — Thu, 05 Aug 2010 18:00:05 +0000

According to Marketwatch.com’s Mark Hulbert: “The stock market will get a major boost at the end of this week. That’s when Congress’ August recess begins, and it isn’t scheduled to go back in session until after Labor Day” as “The stock market on average has performed much better when Congress was not in session.”

Hulbert, citing an academic study by professors Michael Ferguson of the University of Cincinnati and Hugh Douglas Witte of the University of Missouri at Columbia, reported: “”about 90% of the capital gains over the life of the Dow Jones Industrial Average have come on days when Congress is out of session.” The study can be found at (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=687211).

It makes sense, given the nature of Congress’ ability to make life difficult for people who actually work for a living. According to Hulbert: “according to the professors, the Dow between 1897 and 2004 produced an annualized return of 5.3% when Congress was out of session, in contrast to just 0.4% when it was in session.” And Hulbert does allow for the fact that the results could be a “statistical fluke.” This is a notion refuted by the professors, as they point out that ‘Companies and investors face “a more uncertain tax and regulatory environment” when Congress is in session, which means risk is higher then than when Congress is on recess. As confirmation of this finding, the professors point out that the stock market has tended to exhibit significantly greater volatility when Congress is meeting. And volatility is a good proxy for uncertainty.’

Furthermore “The pattern has tended to be strongest when Congress has a low approval rating in public opinion polls. For example, they found, the Congressional Effect has tended to be especially pronounced whenever Congress’ overall approval rating is below 39%. This particular wrinkle in the data suggests the market may receive more than the usual boost during Congress’ upcoming recess,” given the very low ratings for Congress in recent polls.

Testing the Trend

admin — Fri, 23 Jul 2010 19:41:09 +0000

Point and Figure charts provide a great way to “see” trends in the market. Currently the market is trying to break out of the downward trend that has been in place for the past few months.

Better than expected earnings and talk of the possible extension of the Bush tax cuts (which expire at the end of this year) may allow the market to finally break out of the current downtrend.

Will Bush’s tax cuts stick around a bit longer?

admin — Fri, 09 Jul 2010 18:09:27 +0000

While our current market pattern is not pretty, we have seen some strength come back into the market. Some of it is due to the markets being oversold, but some may be coming from the rumors that President Obama may be looking to extend some of the past administration’s tax cuts.

Anaylst Greg Valliere commented on CNBC that Washington insiders are quietly joining together to extend some of Bush’s tax cuts that are set to expire.

Since this is an election year, and many members of Congress are afraid of losing their seat due to the lackluster economy, we may start seeing more aggressive moves to get the economy growing again (or to at least show they are trying to do something).

If this is the case, we may see another summer rally start to take place.

UPTURN

admin — Tue, 15 Jun 2010 14:31:26 +0000

The markets look to be taking a turn to the upside. The “W” formation of the S&P 500 Index combined with the possible break above the 200 day moving average (see my past posts on “Line in the Sand” for why this is important) may lead us to higher markets in the weeks ahead.